Church & Dwight Reports First Quarter Results Effect of Acquiring Remainder of Armkel.Business Editors PRINCETON Princeton, borough (1990 pop. 12,016) and surrounding township (1990 pop. 13,198), Mercer co., W central N.J.; settled late 1600s, borough inc. 1813, township est. 1838. A leading education center, it is the seat of Princeton Univ. , N.J.--(BUSINESS WIRE)--May 11, 2004 Church & Dwight Dwight , Timothy 1752-1817. American clergyman, author, and educator who was a leading supporter of Federalism and served as president of Yale University (1795-1817). His grandson Timothy (1828-1916) was also president of Yale (1886-1899). 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 first quarter net income of $29.9 million or $0.70 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, a 40% increase over the $20.9 million or $0.50 per share for the comparable period a year ago. This year's first quarter, which ended on April 2, was six days longer than the comparable period a year ago, and also benefited from the acquisition of the former Unilever Unilever Either of two linked companies, Unilever PLC (based in London) and Unilever NV (based in Rotterdam). They are the holding companies for more than 500 firms worldwide that manufacture and sell soaps, foods, and other products. North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. oral care business late last year. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. A. Davies Da·vies , Arthur Bowen 1862-1928. American painter who was the chief organizer of the revolutionary Armory Show in 1913. , III, Chairman and Chief Executive Officer of Church & Dwight, commented, "We are pleased with these results and, in particular, the underlying margin expansion which enabled us to fund a substantial increase in marketing and product development. With this strong start, we feel positive about the outlook for the year." Sales increased to $296.0 million from $248.3 million in the comparable period of the previous year. This year's sales included $30.0 million for the former Unilever oral care brands, as well as foreign exchange gains of $1.8 million. Excluding these items, sales would have been $264.2 million, an increase of $15.9 million or 6.4% over last year, primarily due to the additional days in the quarter mentioned earlier. At the product line level, sales of household deodorizing, laundry Laundry can be:
Before industrialization and specialty products were higher, while personal care sales, excluding the acquired products, were lower. At the brand and product level, sales of Arm &Hammer(R) Super Scoop(TM) 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. , Arm & Hammer and Xtra(R) liquid laundry 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 certain specialty chemicals A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. and animal nutrition products, were all particularly strong. Gross margin increased to 32.6%, a 2.9% improvement over last year. The gain was due to a more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. sales mix sales mix See product mix. related to increased sales of higher-margin household deodorizing and personal care products, including the acquired brands, combined with a lower level of trade and consumer promotion spending than in the comparable period last year. Marketing spending of $24.2 million was $7.2 million or 43% higher than last year as the Company took advantage of higher margins to increase marketing spending in support of its household deodorizing and oral care businesses. The $5.8 million increase in selling, general and administrative expenses to $33.9 million, was due to a combination of factors, including higher selling expenses, an increase in trademark amortization, an increase in performance-based compensation, spending on various management information systems projects, and costs to comply with the Sarbanes-Oxley legislation. 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 by $9.7 million or 33.6% to $38.5 million. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: rose to 13.0% from 11.6% in the previous year. Early in the quarter, the Company launched Arm & Hammer Enamel enamel, a siliceous substance fusible upon metal. It may be so compounded as to be transparent or opaque and with or without color, but it is usually employed to add decorative color. It was used to decorate jewelry in ancient Egypt, Greece, and Rome. Care(TM) toothpaste toothpaste, n See dentifrice. , its most important oral care initiative in several years. Enamel Care is the first toothpaste to combine the cleaning and whitening whit·en·ing n. 1. An agent used to make something white or whiter. 2. The act or process of making white or whiter. Noun 1. properties of baking soda baking soda: see sodium bicarbonate. with fluoride fluoride, a salt of hydrofluoric acid; see hydrogen fluoride. See also fluoridation; fluorine. and patented liquid calcium to fill tooth surfaces The tooth surface (flank) forms the side of a gear tooth.1 It is convenient to choose one face of the gear as the reference face and to mark it with the letter “I”. The other non-reference face might be termed face “II”. and restore enamel luster. Responding to this and other marketing initiatives, Arm & Hammer toothpaste sales grew steadily stronger during the quarter. In another step to strengthen its oral care business, late in the quarter, the Company transferred production for three of the toothpaste brands Popular toothpaste brands in the United States include:
n. 1. A photograph or a film or television shot in which the subject is tightly framed and shown at a relatively large scale. 2. An intimate view or description. (R), Aim (R) and Pepsodent Pepsodent is a brand of toothpaste. It was formerly owned by Unilever but, since 2003, by Church and Dwight, . It was advertised for its purported properties fighting tooth decay, attributed in advertisements to the supposed ingredient "Irium". (R) to the Church & Dwight personal care plant at Lakewood Lakewood. 1 City (1990 pop. 73,557), Los Angeles co., S Calif., a residential and industrial suburb of Long Beach; inc. 1954. Nearby are extensive aerospace, high-technology, and electronic industries. 2 City (1990 pop. , NJ. The integration process should be completed in the third quarter with the transfer of Mentadent Mentadent is a brand name for a line of dental products manufactured by Unilever everywhere but United States and Canada, where it was acquired by the Church & Dwight Company in 2003. (R) toothpaste production to this facility. At quarter-end, the Company had total outstanding debt of $364.4 million, and cash of $66.7 million, for a net debt position of $297.7 million, an increase of $25.0 million from the same period last year. Excluding the investment of approximately $110 million in the Unilever acquisition, net debt would have been reduced by about $85 million over the period. Adjusted earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
ARMKEL, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control Armkel, a 50/50 joint venture between Church & Dwight and the private equity group, Kelso Kelso, city (1990 pop. 11,820), seat of Cowlitz co., SW Wash., on the Cowlitz River near the Columbia, in a fertile farm area; inc. 1889. Boatbuilding, fishing, and dairy farming are the major industries. Machinery and paper and wood products are manufactured. & Company, reported net income of $18.2 million, compared to $15.2 million in the comparable period last year. First quarter sales of $113.8 million were $14.1 million or 14.1% above last year as reported, and 7.4% higher adjusted for foreign exchange gains of $6.7 million. Domestic sales of $58.0 million were 11.2% higher, reflecting solid growth by Trojan A program that appears legitimate, but performs some illicit activity when it is run. It may be used to locate password information or make the system more vulnerable to future entry or simply destroy programs or data on the hard disk. (R) condoms and First Response(R) pregnancy kits, as well as the additional days in the quarter referred to earlier. The condom 1. condom - The protective plastic bag that accompanies 3.5-inch microfloppy diskettes. Rarely, also used of (paper) disk envelopes. Unlike the write protect tab, the condom (when left on) not only impedes the practice of SEX but has also been shown to have a high failure business benefited from the addition of two new products to the Trojan line, Shared Pleasure(TM) and Magnum(TM) with Warm Sensations(TM), a unique lubricant Lubricant A gas, liquid, or solid used to prevent contact of parts in relative motion, and thereby reduce friction and wear. In many machines, cooling by the lubricant is equally important. system which warms the skin on contact for enhanced pleasure. International sales of $55.8 million were 17.4% higher as reported, and 3.2% higher adjusted for the foreign exchange gains of $6.7 million, primarily due to strong growth in the U.K. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Armkel had total outstanding debt of $359.9 million, and cash of $64.8 million, for a net debt position of $295.1 million at quarter-end, a reduction of $71.6 million from the same period last year. Adjusted EBITDA, as defined in its loan agreement, is estimated at approximately $32.9 million for the quarter. Mr. Davies noted that, due to the considerable synergies between Church & Dwight and Armkel, the Company looks at the combined results of Church & Dwight and its unconsolidated affiliates in evaluating the financial performance of the business. For the first quarter, combined sales (a non-GAAP measure) increased to $420.6 million, $62.7 million or 17.5% above the previous year. Combined gross margin was 40.1%, compared to 38.4% in 2003. Combined 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. increased $14.7 million or 26.7% to $69.7 million, with an operating margin of 16.6% compared to 15.4% in the previous year. As recently announced, the Company has reached a non-binding understanding with Kelso & Company to purchase its 50% interest in Armkel for a price of approximately $254 million. It is expected that the purchase will be completed on or about May 30, 2004, subject to customary closing conditions including completion of financing. The Company expects to raise a total of $640 million in medium-term credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities , which will be used to finance the acquisition and replace existing borrowing arrangements. The Company noted that Church & Dwight and Armkel are already well integrated, and the transaction is not expected to involve any additional significant integration costs. On the completion of the transaction, however, the Company 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. certain non-cash accounting charges, primarily related to the revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of Armkel's inventories and the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of deferred financing costs. In particular, purchase accounting principles require that the value of Armkel's inventories be stepped-up to "fair value" (including manufacturer's profit) resulting in lower than normal margins as these inventories are sold after the closing. The Company currently estimates that the net effect of the inventory 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. and other purchase accounting adjustments, partially offset by operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before from the acquired business, will be to reduce earnings in the second and third quarters by a total of about $0.20-$0.25 per share. The transaction is expected to become earnings accretive in the fourth quarter. "We expect to have more precise guidance for the year at the time of our second quarter earnings announcement. Meanwhile, given the strong first quarter performance, we feel that our GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings objective for the year should remain at the previously announced $2.07 to $2.10 level even after the above-mentioned adjustments," Davies added. "Regardless of these interim charges, we strongly believe that integrating all of Armkel's business into Church & Dwight will further enhance the strength of our brand portfolio and financial performance in the future," Davies said. As previously reported, at its May 5 Board Meeting, the Board declared a regular quarterly dividend of $0.08 per share. The dividend is payable June 1, 2004 to stockholders of record at the close of business on May 17, 2004. This is the Company's 413th regular quarterly dividend. Church & Dwight will host a conference call to discuss first quarter 2004 earnings results with the investment community on May 11 at 10:00 a.m. (ET). To participate, dial in at 800-299-7635, access code: Church & Dwight. A replay will be available two hours after the call at 888-286-8010, access code: 28202909, as well as on the Company's website. Also, you can participate via webcast by visiting the Investor Relations Investor relations The process by which the corporation communicates with its investors. Section of the Company's website at www.churchdwight.com. Church & Dwight Co., Inc. manufactures and markets a wide range of personal care, household and specialty products, under the ARM & HAMMER brand name and other well-known trademarks. This release contains forward-looking statements 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 short- and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. financial objectives, sales and earnings growth, gross margin, earnings per share, non-cash accounting charges, the integration of the oral care brands acquired from Unilever in 2003, the effects of the Company's proposed acquisition of the remaining 50% interest in Armkel, the integration of Armkel, and financial forecasts. 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 complete the acquisition of the remaining 50% interest in Armkel, the integration of Armkel, trade, competitive and consumer reactions to the Company's products and other factors described in Church & Dwight's quarterly and annual reports filed with the SEC.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended
----------------------------------------------------------------------
(In thousands, except per share data) Apr. 2, 2004 Mar. 28, 2003
----------------------------------------------------------------------
Net Sales $ 295,991 $ 248,298
Cost of sales 199,429 174,464
----------------------------------------------------------------------
Gross profit 96,562 73,834
Marketing expenses 24,188 16,943
Selling, general and administrative
expenses 33,914 28,110
----------------------------------------------------------------------
Income from Operations 38,460 28,781
Equity in earnings of affiliates 9,824 8,152
Other income (expense), net (3,642) (4,871)
----------------------------------------------------------------------
Income before minority interest and
taxes 44,642 32,062
Income taxes 14,730 11,107
Minority Interest 6 9
----------------------------------------------------------------------
Net Income $ 29,906 $ 20,946
----------------------------------------------------------------------
Net Income per share - Basic $0.73 $0.52
Net Income per share - Diluted $0.70 $0.50
----------------------------------------------------------------------
Dividend per share $0.08 $0.075
Weighted average shares outstanding -
Basic 40,882 39,945
Weighted average shares outstanding -
Diluted 42,989 41,852
----------------------------------------------------------------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands) Apr. 2, 2004 Mar. 28, 2003
----------------------------------------------------------------------
Assets
----------------------------------------------------------------------
Current Assets
Cash, equivalents and securities $ 66,666 $ 67,242
Accounts receivable 101,368 96,831
Inventories 98,323 85,912
Other current assets 20,760 25,204
----------------------------------------------------------------------
Total Current Assets 287,117 275,189
----------------------------------------------------------------------
Property, Plant and Equipment (Net) 257,026 240,755
Equity Investment in Affiliates 163,611 136,503
Intangibles and other assets 419,581 333,063
----------------------------------------------------------------------
Total Assets $ 1,127,335 $ 985,510
----------------------------------------------------------------------
Liabilities and Stockholders' Equity
----------------------------------------------------------------------
Short-Term Debt $ 68,547 $ 66,418
Other Current Liabilities 164,796 169,933
----------------------------------------------------------------------
Total Current Liabilities 233,343 236,351
----------------------------------------------------------------------
Long-Term Debt 295,851 273,603
Other Long-Term Liabilities 126,357 107,566
Stockholders' Equity 471,784 367,990
----------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 1,127,335 $ 985,510
----------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
-------------------------
The following discussion addresses the reconciliations below and in
this press release that reconcile non-GAAP and other measures used in
this press release to the most directly comparable GAAP measures:
Adjusted Net Sales
------------------
The press release provides information regarding the Company's Net
Sales adjusted to exclude sales of former Unilever oral care brands
and the effect of foreign exchange adjustments. Management believes
that the presentation of adjusted net sales (including reconciliation
information in the press release) is useful to investors because it
enables them to assess, on a consistent basis, the performance of
Company products that were marketed during the entirety of compared
periods. In addition, management believes that the presentation of net
sales of Armkel, adjusted to exclude the effect of foreign exchange
adjustments (including reconciliation information in the press
release), is useful to investors for the reasons stated above and
because it assists them in gauging management's success in achieving
efficiencies resulting from the combination of the purchasing,
manufacturing and sales and marketing functions of the Company and
Armkel.
Net Debt
--------
The press release contains information reconciling the increase in net
debt to the reduction in net debt that would have occurred if the
Company's investment in the Unilever oral care brands acquisition were
excluded. Management believes the resulting adjusted net debt measure
is useful to investors because it provides information regarding
management's success in reducing debt incurred in connection with
prior acquisitions.
Adjusted EBITDA
---------------
Management believes that Adjusted EBITDA is an important measure to
investors because it indicates the Company's ability to generate
liquidity in a fashion that will enable it to satisfy an important
financial covenant in the Company's principal credit agreement. Set
forth below is a reconciliation of the Company's and Armkel's Adjusted
EBITDA to their respective cash flows from operations, the most
directly comparable GAAP measure.
Adjusted EBITDA
Reconciliation of Net Cash Provided By
Operating Activities to Adjusted EBITDA
(Dollars in Millions)
CHD Armkel
-------- --------
Net Cash Provided by Operating Activities $ 31.1 $ 2.8
Interest Expense 4.5 6.9
Current Income Tax Provision 8.6 3.5
Proceeds from Affiliates 1.2 --
Change in Working Capital &
Other Liabilities 3.7 17.7
Investment Income (0.4 ) (0.3 )
Other -- 2.3
-------- --------
Adjusted EBITDA $ 48.7 $ 32.9
======== ========
Combined Product Line Net Sales, Gross Profit and Operating Profit
------------------------------------------------------------------
The following table reconciles the Company's reported product line net
sales, gross profit and operating profit to the combined amounts for
the Company and its unconsolidated equity investees for the quarters
ended April 2, 2004, and March 28, 2003. The reconciliation reflects
the elimination of inter-company sales and the reclassification of the
administrative costs of production planning and logistics functions.
Management believes this information is useful to investors because
the businesses of the Company and its unconsolidated equity investees
are managed on a combined basis, and management uses combined
performance measures to analyze performance and develop financial
objectives.
Church & Dwight Co., Inc.
Product Line Net Sales, Gross Profit and Operating Profit
Including Unconsolidated Affiliates
1st Quarter 2004 vs 2003
Dollars in Millions
Three Months Ended April 2, 2004
-------------------------------------------------
CHD
As Other Adj's CHD &
Reported Armkel Affiliates ** Affiliates
---------- -------- ---------- ------- ----------
Deodorizing and
Cleaning Products $ 61.1 $ -- $ -- $ -- $ 61.1
Laundry Products $ 105.5 $ -- $ -- $ -- $ 105.5
Personal Care
Products $ 69.5 $ 58.0 $ -- $ -- $ 127.5
International $ 9.0 $ 55.8 $ -- $(0.4 ) $ 64.4
Total Consumer $ 245.1 $113.8 $ -- $(0.4 ) $ 358.5
Specialty Products
Division $ 50.9 $ -- $ 13.2 $(2.0 ) $ 62.1
Total Net Sales $ 296.0 $113.8 $ 13.2 $(2.4 ) $ 420.6
Gross Profit $ 96.6 $ 65.7 $ 2.8 $ 3.5 $ 168.6
% of Net Sales 32.6 % 57.7 % 21.2 % 40.1 %
Operating Profit $ 38.5 $ 29.8 $ 1.4 $ -- $ 69.7
% of Net Sales 13.0 % 26.1 % 10.6 % 16.6 %
Three Months Ended March 28, 2003
-------------------------------------------------
CHD
As Other Adj's CHD &
Reported Armkel Affiliates ** Affiliates
---------- -------- ---------- ------- ----------
Deodorizing and
Cleaning Products $ 53.2 $ -- $ -- $ -- $ 53.2
Laundry Products $ 100.6 $ -- $ -- $ -- $ 100.6
Personal Care
Products $ 42.6 $ 52.1 $ -- $ -- $ 94.7
International $ 7.9 $ 47.5 $ -- $ (0.8 ) $ 54.6
Total Consumer $ 204.3 $ 99.6 $ -- $ (0.8 ) $ 303.1
Specialty Products
Division $ 44.0 $ -- $ 11.9 $ (1.1 ) $ 54.8
Total Net Sales $ 248.3 $ 99.6 $ 11.9 $ (1.9 ) $ 357.9
Gross Profit $ 73.8 $ 58.5 $ 2.5 $ 2.8 $ 137.6
% of Net Sales 29.7 % 58.7 % 21.0 % 38.4 %
Operating Profit $ 28.8 $ 25.1 $ 1.1 $ -- $ 55.0
% of Net Sales 11.6 % 25.2 % 9.2 % 15.4 %
**Adjustments include: elimination of intercompany sales; in Gross
Profit, reclassification of the administrative costs of production
planning and logistics functions.
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