Church & Dwight Co.: Full Year Adjusted EPS Rose 10% On 27% Operating Income and 36% Sales Gain; 4Q Adjusted EPS was Flat On 35% Operating Income and 50% Sales Gain.Business Editors PRINCETON, N.J.--(BUSINESS WIRE)--Feb. 11, 2002 Church & Dwight Co., Inc. (NYSE NYSE See: New York Stock Exchange :CHD CHD coronary heart disease. ChD abbr. Latin Chirurgiae Doctor (Doctor of Surgery) CHD, n.pr See disease, coronary heart. CHD canine hip dysplasia. ) today reported that, for the year 2001, net income increased to $47.0 million or $1.15 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share from $33.6 million or $0.84 per diluted share in the previous year. The year's results included a first quarter $1.4 million or $0.02 per share plant shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down charge, and a fourth quarter $0.15 per share accounting charge related to the step-up step-up A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. of opening inventory values by the Company's new affiliate, Armkel LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , which is described below in the Armkel section of this release. The previous year's results included a $1.2 million or $0.02 per share deferred compensation gain, and a $23.9 million or $0.38 per share plant shutdown charge. Adjusting for these unusual items, earnings per share increased 10% to $1.32 from $1.20 in 2000. On a comparable basis, adjusted operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 27% to $94.9 million from $74.8 million a year ago. Sales increased 35.8% to $1,080.9 million from $795.7 million in the prior year. Robert A. Davies, Chairman and Chief Executive Officer of Church & Dwight, commented, "We are pleased by the vitality vi·tal·i·ty n. 1. The capacity to live, grow, or develop. 2. Physical or intellectual vigor; energy. shown by our existing product lines even as we focused on the acquisition of the former USA Detergents (USAD USAD United States Academic Decathlon USAD United States Army Depot USAD USIGS System Architecture Description ) and Carter-Wallace consumer products businesses. The results were also achieved despite significant integration and start-up Start-up The earliest stage of a new business venture. costs associated with these two major acquisitions. This should set the stage for a solid performance in 2002 and makes us comfortable with analysts' estimates in the range of $1.44 to $1.51 earnings per share for the year." Consumer products sales increased 43.2% to $908.1 million, primarily due to the addition of the Xtra(R) Laundry Laundry can be:
Before industrialization Detergent detergent (dētûr`jənt, dĭ–), substance that aids in the removal of dirt. Detergents act mainly on the oily films that trap dirt particles. and Nice'N Fluffy fluff·y adj. fluff·i·er, fluff·i·est 1. a. Of, relating to, or resembling fluff. b. Covered with fluff. 2. Light and airy; soft: fluffy curls; a fluffy soufflé. (R) Fabric Softener Fabric softener (also called Fabric Conditioner) is used to prevent static cling and make fabric softer. Popular brand names include Lenor, Lenor/Downy, Snuggle, and Comfort. brands as part of the USAD acquisition earlier in 2001, and the addition of the Arrid(R) Anti-Perspirant and Lambert Lambert may refer to
KAY Kansas Association of Youth (R) Pet Care businesses as part of the Carter-Wallace acquisition in the fourth quarter. Excluding these acquisitions, sales of existing consumer products were approximately 3% above last year, with higher sales of deodorizing and laundry products more than offsetting lower oral care and cleaning products sales. Specialty products increased 6.9% to $172.8 million, excluding affiliates, reflecting higher sales of animal nutrition products. As previously reported, the acquisition of the lower-margin USAD brands has affected the Company's overall margin structure and accounts for most of the more than six points reduction in gross margin since last year. However, these brands, which are sold on an "everyday low price" basis, require lower marketing and sales support, which largely offsets the effect of the lower gross margin. For the full year 2001, the operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: adjusted for the unusual items mentioned above was 8.8% compared to 9.4% in the previous year. This is before the Company realizes a high percentage of the USAD synergies and any of the Carter-Wallace synergies referred to later in this release. Fourth quarter 2001 earnings of $0.15 per diluted share compared to $0.27 per diluted share in the same quarter last year. This year's results included the $0.15 per share Armkel related accounting charge referred to earlier; last year's results included a $2.0 million or $0.03 per share plant shutdown charge. Adjusting for these one-time charges, earnings would have been $0.30 per share in both years. Operating income increased 35% to $24.2 million from the previous year's $17.9 million adjusted for the shutdown charge. Sales increased 50.6% to $296.6 million from $196.9 million in the year ago period. Consumer products sales rose 62.3% to $253.8 million for the final quarter. Excluding acquisitions, sales of existing consumer products were 11% higher, with laundry, deodorizers and cleaners, and personal care all running ahead of the previous year. Specialty products were 5.5% higher at $42.8 million excluding affiliates. During the fourth quarter, the Company expanded distribution of several previously announced products, including Arm & Hammer(R) Crystal Blend, a scoopable cat litter Cat litter (often called kitty litter) is one of any of a number of materials used in litter boxes to absorb moisture from cat feces and urine, which reduces foul odors such as ammonia and renders them more tolerable within the home. with silica gel silica gel, chemical compound. It is a colloidal form of silica, and usually resembles coarse white sand. It may be prepared by partial dehydration of metasilicic acid, H2SiO3. Because it has many tiny pores, it has great adsorptive power. crystals and baking soda baking soda: see sodium bicarbonate. for superior deodorization de·o·dor·ize tr.v. de·o·dor·ized, de·o·dor·iz·ing, de·o·dor·iz·es 1. To mask or neutralize the odor of. 2. ; Arm & Hammer Advance Breath Care(TM), a line of oral deodorization products; and the Brillo(R) Gripper(TM) designed for better handling of steel wool steel wool, abrasive material composed of long steel fibers of varying degrees of fineness that are matted together. The coarser grades are used to remove paint and other finishes, the finer grades for polishing or smoothing a finished surface. pads. Early in 2002, the Company relaunched its deodorant deodorant /de·odor·ant/ (de-o´der-int) 1. masking offensive odors. 2. an agent that so acts. de·o·dor·ant n. anti-perspirant line with the introduction of Arm & Hammer UltraMax(TM) Deodorant Anti-Perspirant. The new product line features a patented time-release baking soda deodorizing formula guaranteeing 36-hour protection, coupled with new standout packaging, which capitalizes on the shelf recognition of the classic Arm & Hammer Baking Soda "yellow box." On the specialty products side of the business, the Company is completing construction of a plant in Madera, California Madera is the county seat of Madera County, California. It is the principal city of the Madera, California Metropolitan Statistical Area which encompasses all of Madera County. It is located in the expansive Central Valley. The population was 52,000 at the 2006 census. , for the production of a broader range of Megalac(R) feed ingredients for the fast-growing West Coast dairy feed market. Early in 2002, the Company acquired Biovance Technologies, Inc., a small Oskaloosa, Iowa-based producer of specialty feed ingredients which complements our existing range of animal nutrition products. USAD INTEGRATION In announcing the USAD transaction in April 2001, the Company had estimated that the acquisition would produce synergies of approximately $15 million a year once the integration was completed. During the second and third quarters of 2001, the Company completed the integration of the two Companies' manufacturing, distribution and back office operations. Due to the timing of these integration programs, and the start-up costs involved, the Company estimates that less than half of the potential synergies were realized in 2001. In 2002, the Company expects to gain the full-year benefit of the integration programs completed in the previous year. In addition, about mid-year, the Company plans to implement a series of packaging and formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation changes designed to more fully integrate the two product lines. Based on this activity, the Company expects to significantly increase the contribution from the laundry business in 2002, and to be operating at or above its target synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. levels by year-end. ARMKEL LLC AND CARTER-WALLACE INTEGRATION As previously announced, on September 28, the Company completed the acquisition of the consumer products business of Carter-Wallace in a partnership with the private equity group, Kelso & Company. As part of this transaction, Church & Dwight purchased outright the Arrid Anti-Perspirant business in the USA and Canada and the Lambert Kay pet care business. Armkel LLC, a 50/50 joint venture with Kelso, purchased the remainder of Carter-Wallace's domestic and international consumer products business, including Trojan(R) condoms, Nair(R) depilatories and First Response(R) pregnancy kits. Armkel reported fourth quarter sales of $95.4 million and a preliminary net loss of $15.6 million. The major reason for this loss was an accounting charge related to a step-up in the value of opening inventories in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). acquisition accounting principles. As these inventories are sold, the step-up is charged to current operations. The total step-up was approximately $22.0 million, of which $13.7 million was charged in the fourth quarter and the balance will be charged in 2002. Other factors contributing to the loss included integration costs, and a build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. in trade inventories immediately prior to the acquisition which shifted sales and profit from the fourth to the third quarter. In addition, the fourth quarter is historically a seasonally low period for the business. Under the partnership agreement with Kelso, Church & Dwight is allocated 50% of all book and tax losses up to $10 million, and 100% of such losses above that level. As a result, the Company recorded a loss of $10.0 million on its investment in Armkel. In announcing the Carter-Wallace acquisition, Church & Dwight estimated that the combination of the two companies' domestic U.S. operations would result in synergies of $20 million a year to be split between Church & Dwight and Armkel. During the fourth quarter, the Company took the first important step in the integration process by combining the two sales organizations. Early in 2002, the Company began transferring production of anti-perspirants and depilatories from the former Carter-Wallace plant at Cranbury, NJ, to the more efficient Church & Dwight plant at Lakewood, NJ. The Company expects to complete this process, as well as the full integration of the supply chain and other systems, during the third quarter. While this process is continuing, both Church & Dwight and Armkel will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. significant integration costs, which means that the acquisition may have an adverse effect on earnings for the first and possibly second quarter of 2002. However, the Company expects to substantially achieve the target synergies beginning in the fourth quarter, 2002. DEBT STRUCTURE AND CASH FLOW Church & Dwight had outstanding long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. of $407 million, and cash less short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. of $41 million, for a net debt position of $366 million at year-end. In addition, the Company had unused revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. bank lines of $100 million. Based on the definition in its loan agreements, which includes an add-back of certain one-time integration costs, the Company's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become is estimated at approximately $127 million for the year. Armkel had outstanding long-term debt of $441 million, and cash less short-term and intercompany debt of $40 million, for a net debt position of $401 million at year-end. In addition, Armkel had unused revolving credit bank lines of $85 million. Based on its loan agreements and including an add-back of certain one-time integration costs, Armkel's results for the quarter, combined with those of its predecessor business for the first nine months, together represent an EBITDA of approximately $100 million for the year. ACCOUNTING CHANGES IN 2002 Beginning in January 2002, the Company has adopted two new accounting standards related to sales accounting: EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 00-14 which deals with the accounting treatment for consumer coupons and other forms of consumer incentives, and EITF 00-25 which deals with the accounting treatment for trade promotion allowances. The new standards will require the Company to report such costs as a reduction of sales rather than as marketing expenses as it did beforehand. While the Company has not completed its analysis of historical data, it is currently estimated that, had these standards been in effect for 2001 and 2000, reported net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for both years would have been reduced by approximately 11% to 12%. There would have been no effect on reported operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. or net income. In July 2001, the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). issued SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142, which establishes new standards for the amortization of goodwill and other intangibles acquired in a business combination. The Company adopted this statement upon its effective date. If this statement had been in operation for the full year, the Company estimates there would have been a reduction of amortization expense of approximately $4.2 million, equivalent to $0.06 per share. FINANCIAL OBJECTIVES AND OUTLOOK FOR 2002 Following the USAD and Carter-Wallace acquisitions, which doubled the size of Church & Dwight, the Company will conduct a major strategic business review during the year. While this review may lead to the adoption of new sales and margin growth objectives, the Company affirms that its profit objective is to achieve an earnings growth rate of 12 1/2% to 15% a year for the three-year period 2002 to 2004, using the adjusted $1.32 per share for 2001 as the base. This is an average growth objective for the three-year period, and not necessarily a target for any single year. As to the year 2002, excluding the remaining effect of the Armkel inventory charge, the Company expects that, due to the timing and cost of the integration programs, any profit growth will mainly occur in the second half of the year. Mr. Davies added, "The acquisition of USAD and Carter-Wallace directly, and through Armkel, creates a $1.5 billion business and advances our main objective which is to build a well-balanced, high-growth consumer packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one company capable of expanding its sales and earnings at rates well above those for the industries in which we compete." Church & Dwight will host a conference call to discuss fourth quarter and full year 2001 earnings with the investment community on February 11 at 10:00 a.m. (ET). To listen, please visit the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's web site at www.churchdwight.com or dial in at 877-851-4789. A replay will be available two hours after the call through February 18, 2002. The replay number is 800-642-1687, access code 3135966. In addition, the replay can be heard at www.churchdwight.com. Church & Dwight Co., Inc. is the manufacturer of household, personal care and specialty products, sold under the ARM & HAMMER and other well-known brand names. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating, among others, to financial objectives, sales growth and cost improvement programs. These statements, including the statements above as to the impact of the UDAD and Carter-Wallace acquisition on sales and earnings, 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. These factors, which include the ability of Church & Dwight to successfully integrate the operations of the consumer products business of Carter-Wallace into the Armkel joint venture and Church & Dwight, and assumptions as to market growth and consumer demand (including the effect of recent political and economic events on consumer purchases), and the outcome of contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , including litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , environmental remediation Generally, remediation means providing a remedy, so environmental remediation deals with the removal of pollution or contaminants from environmental media such as soil, groundwater, sediment, or surface water for the general protection of human health and the environment or from a and the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of assets, could cause actual results to differ materially from such forward-looking statements. With regard to new product introductions, there is particular uncertainty related to trade, competitive and consumer reactions. For a description of additional cautionary statements, see Church & Dwight's quarterly and annual reports filed with the SEC, as well as Carter-Wallace's historical SEC reports.
Church & Dwight Co., Inc
Product Line Net Sales
Dollars in Thousands
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
------------------- -----------------------
Oral & Personal Care $ 57,545 $ 36,143 $ 170,778 $ 155,782
Deodorizing & Cleaners $ 82,265 $ 63,851 $ 279,279 $ 248,830
Laundry Products $114,001 $ 56,362 $ 458,010 $ 229,507
------------------- -----------------------
Total Consumer $253,811 $156,356 $ 908,067 $ 634,119
Specialty Chemicals $ 26,728 $ 27,738 $ 111,539 $ 110,671
Animal Nutrition $ 19,066 $ 16,908 $ 76,081 $ 67,880
Specialty Cleaners $ 2,013 $ 1,843 $ 8,390 $ 8,086
------------------- -----------------------
Total Specialty $ 47,807 $ 46,489 $ 196,010 $ 186,637
Total Internal Sales $301,618 $202,845 $1,104,077 $ 820,756
------------------- -----------------------
Unconsolidated
Affiliates $ (5,003) $ (5,925) $ (23,213) $ (25,031)
------------------- -----------------------
Total External Sales $296,615 $196,920 $1,080,864 $ 795,725
=================== =======================
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three Months Ended Twelve Months Ended
Unaudited Unaudited
(In thousands, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
except per share data) 2001 2000 2001 2000
----------------------------------------------------------------------
Net Sales $296,615 $196,920 $1,080,864 $795,725
Cost of sales 191,162 115,979 680,211 450,321
----------------------------------------------------------------------
Gross profit 105,453 80,941 400,653 345,404
Advertising, consumer
and trade promotion
expenses 51,259 39,471 195,960 178,614
Selling, general and
administrative
expenses 30,625 25,620 111,832 92,718
Impairment and
other items (660) - (660) 21,911
----------------------------------------------------------------------
Income from Operations 24,229 15,850 93,521 52,161
Equity in earnings/
(loss) of affiliates (9,264) 978 (6,195) 3,011
Other income
(expense), net (4,212) (351) (9,582) (3,011)
----------------------------------------------------------------------
Income before Minority
interest and taxes 10,753 16,477 77,744 52,161
Minority Interest 106 (37) 3,889 287
----------------------------------------------------------------------
Income before taxes 10,647 16,514 73,855 51,874
Income taxes 4,534 5,826 26,871 18,315
----------------------------------------------------------------------
Net Income $ 6,113 $ 10,688 $ 46,984 $ 33,559
----------------------------------------------------------------------
Net Income per
share - Basic $0.16 $0.28 $1.21 $0.88
Net Income
per share - Diluted $0.15(1) $0.27(1) $1.15(2) $0.84(2)
----------------------------------------------------------------------
Dividend per share $0.075 $0.07 $0.29 $0.28
----------------------------------------------------------------------
Weighted average
shares
outstanding - Basic 39,105 38,216 38,879 38,321
Weighted average
shares
outstanding - Diluted 41,099 39,912 40,819 39,933
----------------------------------------------------------------------
(1) This year's fourth quarter includes a $0.15 per share accounting
charge related to the step-up of opening inventory values by the
Company's new affiliate, Armkel LLC. Last year's fourth quarter
includes a $0.03 per share plant shutdown charge.
(2) This year includes the $0.15 per share accounting charge referred
to in footnote 1, and a $0.02 per share plant shutdown charge.
Last year includes a $0.38 per share plant shutdown charge, and a
$0.02 per share deferred compensation gain.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Unaudited
(Dollars in thousands) Dec. 31, 2001 Dec. 31, 2000
Assets
----------------------------------------------------------------------
Current Assets
Cash, equivalents and securities $ 52,446 $ 24,563
Accounts receivable 104,136 64,958
Inventories 101,214 55,165
Other current assets 36,223 17,841
----------------------------------------------------------------------
Total Current Assets $ 294,019 $ 162,527
----------------------------------------------------------------------
Property, Plant and Equipment (Net) 231,449 168,570
Equity Investment in Affiliates 115,121 19,416
Intangibles and other assets 308,496 105,119
----------------------------------------------------------------------
Total Assets $ 949,085 $ 455,632
----------------------------------------------------------------------
Liabilities and Stockholders' Equity
----------------------------------------------------------------------
Short-Term Debt $ 11,580 $ 13,863
Other Current Liabilities 184,436 135,275
----------------------------------------------------------------------
Total Current Liabilities $ 196,016 $ 149,138
----------------------------------------------------------------------
Long-Term Debt 406,564 20,136
Other Long-Term Liabilities 64,202 51,708
Stockholders' Equity 282,303 234,650
----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 949,085 $ 455,632
----------------------------------------------------------------------
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