10-QPeriod: Q2 FY2008

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q2 Ended Jun 27, 2008

Filed August 4, 2008For Securities:CHD

Summary

For the second quarter and the first six months of 2008, Church & Dwight Co., Inc. (CHD) demonstrated solid top-line growth driven by a combination of higher prices, improved product mix, and increased unit volumes across its key segments. Net sales increased by 8.7% for the quarter and 8.1% for the year-to-date period compared to 2007. Gross profit and gross margin also showed improvement due to manufacturing synergies, product concentration, and cost-reduction programs, although these gains were partially offset by higher commodity and energy costs, as well as costs associated with facility closures. The company is making strategic investments in its future, including plans for a new manufacturing facility in Pennsylvania, while also undergoing a significant facility closure in New Jersey. Financially, CHD has actively managed its debt, reducing short-term borrowings significantly and repaying portions of its long-term debt. A notable event impacting the balance sheet and financing activities is the recent acquisition of Del Laboratories, Inc. for $380.3 million, financed through a combination of new debt and existing cash. Overall, the company's operational performance is strong, with strategic initiatives aimed at long-term growth and efficiency.

Key Highlights

  • 1Net sales increased by 8.7% to $594.0 million for Q2 2008 and by 8.1% to $1,146.8 million for the first six months of 2008, driven by higher prices, mix, and unit volume.
  • 2Gross profit increased by $25.8 million to $242.5 million for Q2 2008 and by $50.0 million to $466.6 million for the first six months of 2008, with gross margin improving to 40.8% and 40.7%, respectively.
  • 3Marketing expenses increased by $13.1 million in Q2 2008, with significant investment in key brands like ARM & HAMMER, TROJAN, and FIRST RESPONSE.
  • 4Selling, general, and administrative (SG&A) expenses increased due to factors including foreign exchange, higher R&D, and stock option expenses, partially offset by a gain on the sale of a subsidiary.
  • 5The company announced plans for a new $150 million laundry detergent plant in Pennsylvania and the closure of its New Jersey facility, incurring associated costs but aiming for future efficiencies.
  • 6Net cash used in financing activities for the first six months of 2008 was $120.1 million, including debt repayments and dividend payments, offset by stock option exercises.
  • 7The company completed a significant acquisition of Del Laboratories, Inc. for $380.3 million in July 2008, financed by new debt and cash, indicating strategic expansion.

Frequently Asked Questions

Net sales for the second quarter of 2008 increased by 8.7% to $594.0 million compared to the same period in 2007. For the first six months of 2008, net sales grew by 8.1% to $1,146.8 million. This growth was attributed to a combination of higher prices, improved product mix, and increased unit volumes.

Church & Dwight announced plans to construct a new $150 million integrated laundry detergent manufacturing plant and distribution center in York County, Pennsylvania, expected to be operational by the end of 2009. Concurrently, the company plans to close its existing laundry detergent manufacturing and distribution facilities in North Brunswick, New Jersey, incurring costs related to severance, exit, and accelerated depreciation.

In July 2008, Church & Dwight acquired Del Laboratories, Inc. for $380.3 million. The acquisition was financed by increasing bank debt by $250.0 million and using $130.3 million (plus fees) from available cash. The new debt terms are consistent with existing bank debt.

While the company has implemented strategies like product concentration and cost reduction programs to mitigate rising costs, higher commodity and energy costs did partially offset the improvements in gross profit and gross margin during the reported periods. For example, the Specialty Products Division experienced higher raw material costs for certain animal nutrition and specialty chemical products.