10-KPeriod: FY2003

CHURCH & DWIGHT CO INC /DE/ Annual Report, Year Ended Dec 31, 2003

Filed March 15, 2004For Securities:CHD

Summary

For the fiscal year ended December 31, 2003, Church & Dwight Co., Inc. (CHD) reported net sales of $1,056.9 million, a slight increase of 0.9% driven primarily by the acquisition of former Unilever oral care brands in the fourth quarter. The company's Consumer Products segment remains its largest, contributing 82% of sales, with its Specialty Products Division making up the remaining 18%. A significant strategic move during the year was the acquisition of the oral care business from Unilever for approximately $104 million, which bolstered CHD's presence in the personal care market and is expected to yield integration benefits and economies of scale. Financially, the company managed its debt effectively, refinancing $100 million of term loans with convertible senior debentures and utilizing a receivables purchase agreement to lower financing costs. While facing intense competition in mature consumer product markets, CHD continues to focus on product innovation and cost-efficiency. The company's primary financial objective is to achieve average annual earnings per share growth of 12.5% to 15% from 2003 to 2005, supported by organic growth, margin improvements, and strategic acquisitions.

Key Highlights

  • 1Net sales reached $1,056.9 million, a 0.9% increase year-over-year, largely due to the acquisition of Unilever's oral care brands.
  • 2Consumer Products represented 82% of sales, while Specialty Products accounted for 18%.
  • 3Acquisition of former Unilever oral care brands (Mentadent, Pepsodent, Aim, Close-up) for approximately $104 million to strengthen the personal care segment.
  • 4Refinanced $100 million of term loans through the issuance of 5.25% convertible senior debentures due 2033.
  • 5Entered into a receivables purchase agreement to refinance $60 million of its credit facility, reducing financing costs.
  • 6Armkel LLC, a 50/50 joint venture, showed strong performance, with its equity in earnings increasing significantly year-over-year.
  • 7Research and development spending remained substantial at $26.9 million, supporting new product introductions and innovation.

Frequently Asked Questions

In 2003, Church & Dwight strategically acquired the oral care business from Unilever for approximately $104 million, significantly expanding its personal care portfolio. The company also focused on strengthening its financial position by refinancing debt through convertible senior debentures and a receivables purchase agreement, aiming to lower financing costs and improve flexibility.

The Consumer Products segment remained the largest, contributing 82% of total sales, with the Specialty Products Division accounting for 18%. The acquisition of Unilever's oral care brands bolstered the Personal Care sub-segment within Consumer Products. Armkel LLC, an unconsolidated joint venture, also demonstrated strong performance, contributing positively to the company's equity in earnings.

Church & Dwight's primary financial objective is to achieve average annual earnings per share growth of 12.5% to 15% between 2003 and 2005. This is expected to be driven by organic sales growth, margin improvements, benefits from recent acquisitions, and potentially acquiring the remaining stake in Armkel LLC. The company anticipates high single-digit sales growth in 2004, supported by new product introductions and strategies to stabilize declining brand sales.

The company faces intense competition from larger players with greater financial resources, which may necessitate increased promotional and advertising expenditures, potentially impacting profit margins. Other risks include potential customer concentration (with Wal-Mart being a significant customer), the success of new product introductions, raw material price fluctuations, and potential negative publicity or regulatory action regarding the spermicide N-9 used in Armkel's condom products.