10-QPeriod: Q2 FY2009

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q2 Ended Jun 26, 2009

Filed August 4, 2009For Securities:CHD

Summary

Church & Dwight Co., Inc. reported strong performance for the second quarter and first half of 2009, demonstrating robust top-line growth and significant improvements in profitability. Net sales increased by 4.9% in the quarter and 5.0% year-to-date, driven by the integration of the Orajel Acquisition, higher pricing, and an improved sales mix. Gross margin expanded notably by 440 basis points in Q2 to 45.2%, attributed to the Orajel products, lower commodity costs, and cost reduction initiatives. Diluted EPS also saw a healthy increase, reflecting the operational improvements. The company's balance sheet strengthened, with cash and cash equivalents nearly doubling from the end of 2008, largely due to strong operating cash flow. Despite increased debt from the Orajel Acquisition, leverage ratios remain well within covenants. The company also announced a significant increase in its quarterly dividend, signaling confidence in its future financial performance and commitment to shareholder returns. Overall, the results indicate a resilient business navigating the economic environment effectively.

Financial Highlights

31 data points
Beta

Revenue

$623.10M

45.2% Gross Margin

Net Income

$58.20M

9.3% Net Margin

EPS (Diluted)

$0.20

Cash & Equivalents

$357.00M

Free Cash Flow

$137.03M

Financial Statements
Beta
Revenue$623.10M
Cost of Revenue$341.57M
Gross Profit$281.60M
SG&A Expenses$88.84M
Operating Income$99.00M
Interest Expense$9.23M
Net Income$58.20M
EPS (Basic)$0.21
EPS (Diluted)$0.20
Shares Outstanding (Basic)281.37M
Shares Outstanding (Diluted)285.71M

Key Highlights

  • 1Net sales increased by 4.9% to $623.1 million for the quarter ended June 26, 2009, and by 5.0% to $1,204.0 million for the first six months, driven by the Orajel Acquisition and favorable pricing/mix.
  • 2Gross margin improved significantly, rising 440 basis points to 45.2% in Q2 2009, due to acquired product margins, lower commodity costs, and pricing initiatives.
  • 3Income from operations increased by 20.9% to $99.0 million for the quarter and by 16.6% to $203.7 million for the six months, reflecting strong sales and gross margin expansion.
  • 4Net income attributable to Church & Dwight Co., Inc. rose by 27.1% to $58.2 million in Q2 and by 18.4% to $120.7 million for the six months.
  • 5Diluted Earnings Per Share (EPS) increased to $0.81 for the quarter and $1.69 for the six months, up from $0.66 and $1.46 respectively in the prior year periods.
  • 6Cash and cash equivalents nearly doubled from $198.0 million at December 31, 2008, to $357.0 million at June 26, 2009, driven by robust operating cash flow.
  • 7The regular quarterly dividend was increased from $0.09 to $0.14 per share, demonstrating confidence in future performance.

Frequently Asked Questions

The Orajel Acquisition, completed in July 2008, significantly contributed to the top-line growth. Net sales in the second quarter of 2009 saw a 3.7% increase attributable to products acquired in the deal, and for the first six months, it contributed $50.3 million in sales. The acquisition also positively impacted gross margins due to higher margins associated with these products.

The substantial increase in gross margin is attributed to several factors: higher margins from the Orajel Acquisition products, lower commodity costs, the benefit of price increases implemented in 2008, the transition to concentrated liquid laundry detergents, and the positive impact of cost reduction programs. Foreign exchange rates and charges related to the planned closing of a manufacturing facility partially offset these gains.

The company's cash and cash equivalents significantly increased from $198.0 million at the end of 2008 to $357.0 million by mid-2009. This increase is primarily due to strong cash flow from operations. The company also has substantial availability under its accounts receivable securitization and revolving credit facilities, indicating a healthy liquidity position sufficient to meet its capital expenditure needs, debt obligations, and dividend payments.

While the company took on additional debt for the Orajel Acquisition, its net debt decreased from $658.1 million at the end of 2008 to $492.5 million by June 26, 2009, due to the increase in cash. The company's leverage ratios (total debt to Adjusted EBITDA) and interest coverage ratios remain well within the limits permitted by its credit facilities, suggesting strong financial management and ample capacity for future operations and investments.