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Church & Dwight Reports Third Quarter 2012 Results

Stocks in this article: CHD

Church & Dwight Co., Inc. will host a conference call to discuss third quarter 2012 results on November 5, 2012 at 10:00 a.m. (ET). To participate, dial in at 877-741-4354, access code: 50132629 (International: 832-900-4630, same access code: 50132629). A replay will be available two hours after the call at 855-859-2056 or 404-537-3406 (same access code: 50132629). You also can participate via webcast by visiting the Investor Relations 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 relating to, among other things, the effect of product mix; the impact of the Avid acquisition; earnings per share; reported net sales growth and organic sales growth; volume growth, including the effects of new products; gross margins; operating margins; marketing spending; commodity price increases; consumer spending; cost savings programs; marketing support; effective tax rate; net cash from operating activities; capital expenditures; competition; and customer response to new products. These statements represent the intentions, plans, expectations and beliefs of 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), retailer actions in response to changes in consumer demand and the economy, raw material and energy prices, the financial condition of major customers and suppliers, interest rate and foreign currency exchange rate fluctuations, the impact of Hurricane Sandy on the Company and its third party manufacturers, suppliers and customers, and changes in marketing and promotional spending. 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 that could materially affect actual results include the outcome of contingencies, including litigation, pending regulatory proceedings, environmental matters and the acquisition or divestiture of assets. For a description of additional factors that could cause actual results to differ materially from the forward looking statements, please see the Company’s quarterly and annual reports filed with the SEC, including information in the Company’s annual report on Form 10-K in Item 1A, “Risk Factors”.

                         
 

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

 
          Three Months Ended         Nine Months Ended
(In millions, except per share data)         Sept. 30, 2012     Sept. 30, 2011         Sept. 30, 2012     Sept. 30, 2011
Net Sales $ 725.2 $ 701.0 $ 2,112.2 $ 2,018.2
Cost of sales           397.7         391.1             1179.2         1,120.2  
Gross profit 327.5 309.9 933.0 898.0
Marketing expenses 92.2 91.8 248.6 248.5
Selling, general and administrative expenses           89.9         91.8             273.9         274.3  
Income from Operations 145.4 126.3 410.5 375.2
Equity in earnings of affiliates 2.4 2.9 7.3 8.3
Other income (expense), net           (1.8 )       (3.2 )           (5.5 )       (6.9 )
Income before non-controlling interest and taxes 146.0 126.0 412.3 376.6
Income taxes 52.1 46.4 143.3 130.8
Net Income of Non-Controlling Interest           0.0         0.0             0.0         0.0  
Net Income attributable to Church & Dwight         $ 93.9       $ 79.6       $     269.0       $ 245.8  
Net Income per share - Basic $ 0.67 $ 0.55 $ 1.92 $ 1.72
Net Income per share - Diluted         $ 0.66       $ 0.54       $     1.88       $ 1.68  
Dividend per share $ 0.24 $ 0.17 $ 0.72 $ 0.51
Weighted average shares outstanding - Basic 139.5 143.7 140.4 143.3
Weighted average shares outstanding - Diluted           142.2         146.3             143.1         145.9  
 
 
                 
 

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

 

(Dollars in millions)

            Sept. 30, 2012       Dec. 31, 2011
Assets                          
Current Assets                          
Cash, equivalents and securities $ 241.2 $ 251.4
Cash held in escrow 650.0 0.0
Accounts receivable 278.3 264.6
Inventories 225.1 200.7
Other current assets               41.3         38.5
Total Current Assets               1,435.9         755.2
Property, Plant and Equipment (Net) 542.4 506.0
Equity Investment in Affiliates 20.3 12.0
Tradenames and Other Intangibles 886.6 904.1
Goodwill 868.4 868.4
Other Long-Term Assets               86.2         71.9
Total Assets             $ 3,839.8       $ 3,117.6
Liabilities and Stockholders’ Equity                          
Short-Term Debt             $ 254.4       $ 2.6
Other Current Liabilities               398.0         381.0
Total Current Liabilities               652.4         383.6
Long-Term Debt 649.4 249.7
Other Long-Term Liabilities 479.8 443.5
Stockholders’ Equity               2,058.2         2,040.8
Total Liabilities and Stockholders’ Equity             $ 3,839.8       $ 3,117.6
 
 
               
 

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flow (Unaudited)

 
            Nine Months Ended
(Dollars in millions)           Sept. 30, 2012       Sept. 30, 2011
 
Net Income $ 269.0 $ 245.8
 
Depreciation and amortization 59.4 58.7
Deferred income taxes 14.0 37.6
Non cash compensation 10.6 9.7
Other 0.7 (1.1 )
 
Changes in assets and liabilities:
Accounts receivable (16.5 ) (29.0 )
Inventories (22.7 ) (29.3 )
Other current assets 2.0 (1.8 )
Accounts payable and accrued expenses 5.8 20.6
Income taxes payable 20.4 20.9
Excess tax benefits on stock options exercised (14.0 ) (10.7 )
Other liabilities             (12.8 )         (2.2 )
Net cash from operating activities 315.9 319.2
 
Acquisitions - (64.8 )
Deposits of cash held in escrow (650.0 ) -
Capital expenditures (49.7 ) (40.8 )
Investment in joint venture (9.7 ) -
Other             (1.6 )         0.7  
Net cash used in investing activities (711.0 ) (104.9 )
 
Net change in debt 651.6 (86.1 )
Payment of cash dividends (101.0 ) (73.1 )
Stock option related 34.5 30.9
Purchase of treasury stock (200.4 ) (0.1 )
Deferred financing costs             (3.4 )         (0.7 )
Net cash provided by (used in) financing activities 381.3 (129.1 )
 
F/X impact on cash             3.6           0.6  
 
Net change in cash and investments           $ (10.2 )       $ 85.8  
 
 
           
 

2012 and 2011 Product Line Net Sales

         
Three Months Ended Percent Change
  9/30/2012         9/30/2011      
 
Household Products $ 360.4 $ 335.0 7.6 %
Personal Care Products   170.0         171.1       -0.7 %
Consumer Domestic 530.4 506.1 4.8 %
Consumer International   131.1         128.5       2.0 %
Total Consumer Net Sales 661.5 634.6 4.2 %
Specialty Products Division   63.7         66.4       -4.0 %
Total Net Sales $ 725.2       $ 701.0       3.5 %
 
Nine Months Ended Percent Change
  9/30/2012         9/30/2011      
 
Household Products $ 1,054.2 $ 952.1 10.7 %
Personal Care Products   493.3         507.4       -2.8 %
Consumer Domestic 1,547.5 1,459.5 6.0 %
Consumer International   373.8         364.1       2.7 %
Total Consumer Net Sales 1,921.3 1,823.6 5.4 %
Specialty Products Division   190.9         194.6       -1.9 %
Total Net Sales $ 2,112.2       $ 2,018.2       4.7 %
 
 

The following discussion addresses the non-GAAP measures used in this press release and reconciliations of non-GAAP measures to the most directly comparable GAAP measures:

The following non-GAAP measures may not be the same as similar measures provided by other companies due to differences in methods of calculation and items and events being excluded.

Organic Sales Growth

The press release provides information regarding organic sales growth, namely net sales growth excluding the effect of acquisitions and foreign exchange rate changes , and the impact resulting from a timing shift in customer orders due to the information systems upgrade. Management believes that the presentation of organic sales growth is useful to investors because it enables them to assess, on a consistent basis, sales trends related to products that were marketed by the Company during the entirety of relevant periods , excluding the effect of sales timing shifts and foreign exchange rate changes that are out of the control of, and do not reflect the performance of, management.

         
 
Three Months Ended 9/30/2012
               
Total Company Worldwide Consumer Consumer Domestic Consumer International Specialty Products
 
Reported Sales Growth 3.5 % 4.2 % 4.8 % 2.0 % -4.0 %
Add:
FX 1.2 % 1.1 % 5.3 % 3.1 %
Sales in Anticipation of ERP Conversion 0.2 % 0.3 % 1.3 %
Less:
Acquisitions 0.3 % 0.4 % 1.9 %
                   
 
Organic Sales Growth 4.6 % 5.2 % 4.8 % 6.7 % -0.9 %
 
Nine Months Ended 9/30/2012
 
Total Company Worldwide Consumer Consumer Domestic Consumer International Specialty Products
 
Reported Sales Growth 4.7 % 5.4 % 6.0 % 2.7 % -1.9 %
Add:
FX 1.1 % 0.9 % 4.7 % 2.5 %
Sales in Anticipation of ERP Conversion 0.5 % 0.5 % 0.6 % 0.4 % 0.5 %
 
Less:
Acquisition 0.8 % 0.8 % 4.2 %
 
                   
 
Organic Sales Growth 5.5 % 6.0 % 6.6 % 3.6 % 1.1 %
 
 

Projected Percentage Increase in Earnings Per Share Growth and Adjusted Gross Margin Improvement

The press release provides information regarding the Company's net income per share growth adjusted to exclude the deferred tax charge of $0.09 per share in the fourth quarter of 2011 and gross margin improvement to exclude the impact of the Avid acquisition. Management believes that the presentation of adjusted net income per share and adjusted gross margin improvement is useful to investors because it enables them to assess the Company's historical performance exclusive of extraordinary events that do not reflect the Company's day-to-day operations and the gross margin of products that were marketed by the Company during the entirety of relevant periods.

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