This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Church & Dwight Co. (CHD) on February 5, 2008.
Management:
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Chairman and CEO: James R. Craigie
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EVP, Finance and CFO: Matthew T. Farrell
Key Investors Issues
- Revenues increased 10% to $579.7 million.
- Net income was $31.7 million or 46 cents per share, up 32.6%.
- The company declared a quarterly dividend of 8 cents per share.
Full Year Highlights:
- Sales increased 14% to $2.2 billion from $1.9 billion in 2006 as organic sales growth was 5%.
-Earnings per share were up 19% to $2.46 compared to $2.07 in the prior year.
- Cash flow from operations increased 34% to $249 million and free cash flow was up 44% to $200 million.
Fourth Quarter Highlights
Net sales increased 10% to $579.7 million, as organic sales, which exclude the impact of foreign exchange, increased by 9%.
- Consumer Domestic sales were $407.8 million, a 6% increase over the prior period sales of $383.3 million.
- Sales of Arm & Hammer Super Scoop(R) cat litter, Trojan(R) condoms, SpinBrush(R) battery-powered toothbrushes, First Response(R) pregnancy test kits, Arm & Hammer(R) toothpaste, and Nair(R) depilatories were all higher than last year''s fourth quarter.
- These increases were offset partially by lower sales of Mentadent and Pepsodent toothpaste.
Consumer International sales of $99.5 million increased 13% over the prior period sales, of which 10% was primarily due to foreign currency changes.
- Specialty Products sales increased 31% to $ 72.3 million due to higher volumes and pricing in the animal nutrition and specialty chemical businesses.
- Gross margin was 38.3% compared to 38.8% in the prior period due to business mix.
- Marketing expense was $75.1 million, an $8.6 million increase over the prior period and as a percentage of net sales increased to 13.0% compared to 12.6% in the prior period.
- The company launched Arm & Hammer with Oxi Clean Liquid Laundry Detergent with significant marketing support which will continue in early 2008.
Selling, general, and administrative expense was $89.1 million, a $4.6 million decrease over the prior period, and includes $6.7 million of trademark impairment and reorganization costs.
- Operating income increased by 30% to $57.7 million compared to $44.2 million in the prior period.
- Other expense was $11.0 million compared to $14.2 million in the prior period due to reduced interest expense and higher interest income.
- Net income was $31.7 million or 46 cents per share, up 32.6% from $23.9 million or 36 cents per share in 2006, including a $3.5 million charge relating to reorganization and trademark impairment charges of $4.2 million.
- The company declared a quarterly dividend of 8 cents per share.
Strategic Insights:
- The firm looks to building a very strong portfolio of leading brands, and seeks to be the number one or number two brands.
- The goal is to deliver shareholder return at places in the top quartile of the S&P 500 over the long term.
- The main drivers of shareholder value will be growth, margins, and free cash flow directly to strategic priorities.
- In that context, the firm will continue to remain focused on improving the positioning of brands in the marketplace, accelerating the rate of innovation of new products, entering new global markets and expanding business in existing markets.
- It will also drive costs out of the system both the supply chain and overhead costs, and pursue TSR accretive acquisitions to build up on the strong foundation.
New Product Development:
- The firm put a new product team focused just on new product development in 2006, and in 2007 the team launched a record number of new products for future growth.
- In late 2007, the company launched ARM & HAMMER Laundry Detergent with OxiClean that combines the great deodorization and cleaning power of ARM & HAMMER detergents, with the powerful stain fighting benefits of OxiClean.
- In cat litter, the firm also launched a product called Odor Alert, which is the only cat litter that changes color when the cat soils it, so the consumer can see and remove the soiled product before they smell it.
Products coming to market include First Response Gold, a pregnancy kit that uses gold technology, making it more sensitive than other kits and gives accurate results five days before your miss period.
- In the Trojan business, focus is on the thin segment, which is a growing segment of the condom category and provides greater sensitivity, with new products to be launched, Trojan Thintensity and Magnum Thin.
- In oral care, ARM & HAMMER Age Defying toothpaste, which protects and rebuilds enamel and a Whitening Booster are planned.
- Also in the depilatory line, a new product called Shower Power is also in the pipeline.
