10-QPeriod: Q2 FY2011

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q2 Ended Apr 1, 2011

Filed May 6, 2011For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported a modest increase in net sales for the first quarter of 2011, reaching $642.3 million, a 1.2% rise compared to the same period in 2010. This growth was driven by positive volume contributions from consumer products, particularly in the domestic market, and the addition of recently acquired product lines, offset by unfavorable pricing and sales mix, and some divestitures. Net income also saw an increase, rising to $83.6 million from $80.0 million in the prior year, resulting in diluted earnings per share of $1.15, up from $1.11. The company demonstrated solid operational cash flow generation, providing $79.5 million in net cash from operating activities, an improvement from the prior year. This was supported by higher net income and favorable changes in deferred income taxes, though partially impacted by increased working capital needs. The company also made significant progress in deleveraging, reducing net debt and notably repaying the entire $90.0 million outstanding under its accounts receivable securitization facility, strengthening its balance sheet and financial flexibility.

Financial Highlights

53 data points
Beta

Revenue

$674.90M

44.5% Gross Margin

Net Income

$82.60M

12.2% Net Margin

EPS (Diluted)

$0.28

Total Assets

$2.95B

Cash & Equivalents

$159.10M

Free Cash Flow

$72.70M

Financial Statements
Beta
Revenue$674.90M
Cost of Revenue$354.20M
Gross Profit$300.00M
R&D Expenses$12.50M
SG&A Expenses$87.80M
Operating Income$117.80M
Interest Expense$2.70M
Net Income$82.60M
EPS (Basic)$0.29
EPS (Diluted)$0.28
Shares Outstanding (Basic)285.60M
Shares Outstanding (Diluted)290.60M

Key Highlights

  • 1Net sales increased by 1.2% to $642.3 million in Q1 2011 compared to Q1 2010.
  • 2Net income rose by 4.5% to $83.6 million, with diluted EPS growing to $1.15 from $1.11.
  • 3Operating cash flow improved to $79.5 million from $72.0 million year-over-year.
  • 4The company repaid $90.0 million in short-term borrowings related to its accounts receivable securitization facility.
  • 5Gross margin experienced a slight decrease of 10 basis points to 44.9%, mainly due to higher commodity costs and unfavorable sales mix.
  • 6Interest expense significantly decreased by $5.5 million due to a lower average debt outstanding.
  • 7The company announced a two-for-one stock split to be effective in June 2011.

Frequently Asked Questions

The increase in net sales was primarily driven by higher product volumes sold in consumer products, both domestically and internationally, along with contributions from recently acquired product lines like Simply Saline and Feline Pine. These positive drivers were partially offset by unfavorable pricing and sales mix, and the impact of divested product lines.

Net income increased by 4.5% to $83.6 million in the first quarter of 2011, leading to an increase in diluted Earnings Per Share (EPS) to $1.15 from $1.11 in the prior year. While gross profit increased slightly in dollar terms, the gross margin saw a minor decrease due to higher commodity costs and an unfavorable sales mix.

As of April 1, 2011, Church & Dwight had $159.1 million in cash and significant availability under its credit facilities. The company repaid its entire $90.0 million short-term borrowing under the accounts receivable securitization facility during the quarter, reducing its net debt. The company anticipates that its operating cash flow and borrowing capacity will be sufficient to meet its capital expenditure and dividend obligations.

Yes, the company announced a two-for-one stock split payable in June 2011. Additionally, they are planning to relocate a portion of their Green River, Wyoming operations to Victorville, California, in the first half of 2012, involving significant capital expenditures and transition expenses. There is also a projected deferred income tax benefit of approximately $6 million to be recognized in the second quarter of 2011 due to New Jersey corporate income tax reform.