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Church & Dwight First Quarter Earnings Call
Author: 123jump.com Staff
123jump.com
Last Update: 5:06 AM EDT May 10 2008


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The ARM & HAMMER brand owner posted Q1 net sales of $552.9 million and organic net sales increased approximately 6% for the quarter, excluding a positive foreign exchange impact of about 1.5%. The net income for Q1 increased 23% from the past year quarter levels of $45.1 million to the current quarter level of $56.2 million. The management reported that about 5 cents to 6 cents of the year-over-year EPS boost is due to the timing of slotting and the diesel hedge gain.


Investors Question and Answers

 
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Sequential Earnings Growth | Quarterly Earnings by Year | Quarterly Earnings Growth by Year

Source: Company filings    Q1:March  Q2:June  Q3:September  Q4:December
 
James R. Craigie: There has been a little bit but not much and that''s part of the reasons we are being so careful on our inventories. Our consumption is very strong. Whatever level they lower inventories, they are going to have to buy back though it has been minor.

Connie Maneaty (BMO Capital Markets Corp.): You were going to be expanding Arm & Hammer with OxiClean stain removers. Does that mean you are already adding new SKUs since it just shipped in Q4 or you are getting new distributions?

James R. Craigie: It''s not distribution. We launched it in both liquid and powder form and it is driving the growth of both the liquid and powder distribution businesses. It''s been helpful in the powder business too and it''s getting better distribution as we grow. We don''t have the power to get full distribution in a short time period like some bigger companies are. Our distribution growth therefore takes a little longer.

Connie Maneaty (BMO Capital Markets Corp.): Do you think the 10% growth through the mega brand Arm & Hammer in Q1 is impressive and does that apply for the whole year?

James R. Craigie: We will not keep up with those levels but we got it up into the 5% to 6% level last year. We feel comfortable on that for the total year.

Alice Longley (Buckingham Research Group): Your gross margins are going to be up a 100 basis points for the year. Does that include the 160 basis points in the first quarter?

James R. Craigie: Yes.

Alice Longley (Buckingham Research Group): How much of the 5 cents to 6 cents from the special items were diesel costs hedging?

James R. Craigie : 2 cents of it was diesel.

Alice Longley (Buckingham Research Group): Within Specialty Products, how much of the 22% increase was pricing?

Matthew T. Farrell: More than half of it.

James R. Craigie: We had price increases in virtually the entire portfolio in Specialty Products. We also had the surcharge that we put in place last year in August. That was carried forward too and out of that 25%, probably 20% is price.

Alice Longley (Buckingham Research Group): With that pricing, are gross margins for the Specialty business up or they are still down?

James R. Craigie: They''re not down. They are flat year-over-year.

Alice Longley (Buckingham Research Group): Does that mean the Consumer business gross margins were up even more without this?

James R. Craigie: That''s correct.

Matthew T. Farrell: We have a growing SPD business with 22% margins. Consequently, the Consumer gross margins expand. If I took out the two timing items, slotting and diesel, the company was up 60 basis points year-over-year. Then if you took the Specialty Products business out of the equation and asked how much the Consumer business worldwide expanded, it would be 110 basis points. It therefore would be 110 basis points minus 50 basis points for SPD and this gets you the 60 basis points, which is a 60 basis points number we''ve talking about. It''s therefore an excellent quarter for Consumer.

Alice Longley (Buckingham Research Group): You commented about how you see private label up in some categories and that your premium brands might be a little vulnerable, especially OxiClean and SpinBrush. Where are you seeing private label gain share and are you seeing any slowing in OxiClean and SpinBrush?

James R. Craigie: We''re seeing private label gain share in laundry; we''ve seen a little bit in cat litter and we''ve seen some in pregnancy kits. In each one of those categories, our consumption is up very strongly. As of now, private label is not affecting us because of our new product innovations and our marketing spending. However it''s a concern and we''re watching it. It’s typical in this kind of economy. We however feel fine. We had record shares this quarter on cat litter, Trojan and pregnancy kit business. We''re doing what we have to do for private label. We launched innovative new products to be product differentiated and we are providing strong market support in keeping our price gaps appropriately. We also have value pregnancy kit in the brand called Answer, which is getting strong growth on top of the growth of First Response.

Alice Longley (Buckingham Research Group): Is First Response, the pregnancy test kit, also gaining share?
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