This summary is based on the first quarter fiscal 2008 earnings call conducted Church & Dwight Company Inc. (CHD) on May 6, 2008.
Management:
Chairman and CEO: James R Craigie
EVP and CFO: Matthew T Farrell
Key Investor Issues:
- Q1 EPS were 81 cents versus 66 cents in the year ago quarter.
- Quarterly net sales were $552.9 million compared with $514.3 million in Q1 of 2007.
- EPS are forecast to be 61 cents and $2.77 for Q2 and full year respectively.
First-Quarter Financial Highlights:
The Consumer Domestic sales in the first quarter were $382.8 million.
This represents an increase of $12.9 million or 3.5% versus the prior year quarter sales of $369.9 million.
- The sales of Arm & Hammer Super Scoop cat litter, Arm & Hammer liquid laundry detergent, FirstResponse pregnancy test kits, Arm & Hammer powder laundry detergent, Xtra liquid laundry detergent and Arm & Hammer Dental Care toothpaste were all higher than last year’s first quarter.
- The Consumer Domestic sales also benefited from February price increases on condoms and baking soda.
- The Consumer International sales increased 15% to $99.7 million compared with the prior year quarter. The management indicated that 10% was due to foreign exchange changes, with the balance primarily due to growth in several countries.
- The Specialty Product sales grew 22% to $70.4 million, due to higher pricing and volumes in the animal nutrition and specialty chemicals businesses.
Gross margin increased by 160 basis points to 40.5% in the first quarter versus 38.9% in the same quarter last year.
- The increase in gross margin includes the benefits of cost reduction programs, manufacturing synergies relating to the businesses acquired from Orange Glo International Inc. in 2006, price increases and the benefits of liquid laundry detergent concentration, partly offset by higher commodity and energy costs.
- The management reported that a shift in the timing of the payment of slotting costs for new products and the impact of a diesel fuel hedging program contributed about 100 basis points to the gross margin expansion.
- These items are anticipated to result in higher costs in future quarters.
The operating income increased 13% to $92.8 million in the first quarter compared with $82.1 million for the same period last year.
The increase was driven by higher sales and gross profit partially offset by higher marketing and SG&A expenses. The operating margin rose 80 basis points to 16.8% during the quarter.
The marketing expense was $53.5 million, representing an increase of $7.6 million versus the last year quarter.
- The marketing expense as a percentage of net sales rose 80 basis points to 9.7% during the quarter compared with 8.9% in the same period last year.
The SG&A expenses were $77.9 million for the quarter compared with $71.9 million in the year ago quarter.
SG&A as a percentage of net sales was 14.1% during the quarter, consistent with last year’s first quarter. The increase in SG&A is due to $5.4 million of asset impairments, higher litigation costs, higher selling expenses in support of higher sales and higher R&D spending to support new products. The management reported that the increases were partially offset by a $3 million gain on the divestiture of a small Specialty Products subsidiary, which was sold during the quarter for about $11 million.
The quarterly other expenses decreased to $7.7 million during the quarter versus $14 million for the same period last year.
