Church & Dwight Co., Inc. (NYSE:CHD) today reported net income for the quarter ended June 30, 2013 of $86.6 million or $0.61 per share, compared to net income of $79.3 million or $0.56 per share for the same period in 2012. Reported net sales for the second quarter increased 13.1% to $787.6 million. Earnings per share increased 8.9%.
Second Quarter Review
Mr. Craigie, Chairman and Chief Executive Officer, commented, “We are pleased with our second quarter business results. The global domestic and international consumer businesses, constituting over 90% of the company’s total sales, delivered organic growth of 3.2% driven by increased market share on six of our eight power brands. Demand from the dairy customers of our Specialty Products business was significantly impacted by colder than normal weather, which reduced our consolidated organic sales growth to 1.8%, reflecting 2.7% volume growth and 0.9% unfavorable product mix and pricing. We also exceeded our gross margin expectations and delivered the fourth consecutive quarter of 100+ basis points of gross margin expansion.”
Consumer Domestic net sales were $594.5 million, an $88 million or 17.4% increase over the prior year second quarter sales. Second quarter organic sales increased by 2.5%, primarily due to higher sales of ARM & HAMMER liquid laundry detergent, OXICLEAN laundry additives, TROJAN products, and FIRST RESPONSE diagnostic kits. These increases were partially offset by lower sales of ARM & HAMMER powder laundry detergent, XTRA liquid laundry detergent, and NAIR depilatories. Volume growth contributed 4.6% to the increase in sales, partially offset by 2.1% unfavorable product mix and pricing.Consumer International net sales were $132.7 million, an $11.4 million or 9.4% increase over the prior year second quarter sales. Second quarter organic sales increased by 6.3%, primarily due to stronger sales in Canada, the UK, and Australia. Volume growth contributed 2.8% to the increase in sales, and 3.5% resulted from favorable product mix and pricing. Specialty Products net sales were $60.4 million, an $8.2 million or 12.0% decrease over the prior year second quarter. Second quarter organic sales decreased by 11.2%. The significant decrease is primarily attributable to colder than normal weather throughout the second quarter which resulted in a significant decline in demand from the dairy industry. Volume declines drove 10.9% of the decrease in sales, and 0.3% resulted from unfavorable product mix and pricing. Gross margin expanded 110 basis points to 44.6% in the second quarter compared to 43.5% in the prior year second quarter. The expansion is due primarily to the positive impact of productivity programs. Commodity costs were flat in the quarter versus the prior year second quarter. Marketing expense was $103.7 million in the second quarter, a $15.3 million or 17% increase over the prior year second quarter as we continue to increase the investment in our power brands. Marketing expense as a percentage of net sales was 13.2%, a 50 basis points increase from the prior year second quarter. Selling, general, and administrative expense (SG&A) was $106.8 million in the second quarter, a $14.6 million increase from the prior year second quarter primarily due to the inclusion of the recently acquired gummy vitamin business. SG&A as a percentage of net sales was 13.6%, a 40 basis point increase from the prior year second quarter. Income from operations was $140.5 million in the second quarter, an $18.1 million or 14.8% increase over the prior year second quarter. Operating income as a percentage of net sales was 17.8%, a 20 basis point increase over the prior year second quarter. The effective tax rate in the second quarter was 34.5%, compared to 35.6% in the prior year second quarter. The Company expects the full year effective tax rate to be approximately 35%. Cash Flow For the first six months of 2013, net cash from operating activities was $161.0 million, a $28.2 million decrease from the prior year second quarter, due to a $36 million deferral of the December 2012 estimated federal tax payment to January 2013 as a result of Hurricane Sandy relief. Capital expenditures were $20.1 million, a $19.9 million decrease from the first half of 2012 which included the construction of the Company’s Victorville, California plant. Full year capital expenditures are estimated to be approximately $80 million.
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