Church & Dwight’s Second Quarter Sales Rise Nearly 13%

Church & Dwight Co., Princeton, NJ, reported second quarter sales, excluding Armkel and other affiliates, increased 12.6% to $258.5 million from $229.6 million last year. This increase is primarily due to the Arrid antiperspirant and Lambert Kay pet care product lines acquired from Carter-Wallace late in 2001. Consumer products sales increased 14.2% to $212 million, and specialty products sales rose 5.6% to $46.5 million. Excluding acquisitions, as well as some minor divestitures and the export operation that is being reorganized, consumer products sales increased 4%, with higher laundry and deodorizer sales, partially offset by lower personal care.

Laundry sales benefited from strong growth by Arm & Hammer liquid laundry detergent and Fresh’N Soft fabric softener sheets. Within personal care, toothpaste sales declined; however, the Arm & Hammer deodorant antiperspirant product line, recently relaunched under the Ultramax name, regained momentum during the quarter, supported by a major advertising campaign featuring the New York Yankees baseball star, Jason Giambi, executives said.

Net income of $18.7 million. This year’s results included an unusual per share gain related to the allocation of profits by the company’s affiliate, Armkel, LLC.

“We are pleased to report that the integration of our two major 2001 acquisitions, USA Detergents and the consumer business of Carter-Wallace, is now virtually complete,” said Robert A. Davies, III, chairman and chief executive officer. “Although some of the benefits will not be fully reflected in income until later this year and early 2003, we are now confident that both acquisitions will achieve their planned synergies and other financial objectives.”

The company’s intends to invest a high percentage of the acquisition benefits going forward in higher marketing expenditures and product development.

During the quarter, the company completed the final major step in the integration of the former USA Detergents business, involving the standardization of packaging components for the Arm & Hammer and Xtra product lines. Late in the quarter, the company also completed a major step in the integration of the former Carter-Wallace business by shifting Arrid antiperspirant production to the Church & Dwight plant in Lakewood, NJ, and shutting down the former Carter-Wallace facility at Cranbury, NJ. This step will improve margins once existing inventories are sold later this year. As a result, gross margin which slightly declined in the first half, is expected to increase in the second half of the year, according to executives.

For the six months, net income increased to $33.6 million. Operating income, combined with the company’s share of the income from affiliates, increased 40% to $63.8 million as reported. Six months sales, excluding unconsolidated affiliates, increased 12.9% to $515.3 million. In addition to its interest in Armkel, the company has two unconsolidated 50%-owned affiliates in the specialty products business, Armand Products and Armakleen. Combined sales of Church & Dwight and these three affiliates increased 55% to $747.2 million, primarily due to the acquisition of the Carter-Wallace business.

Referring to the Company’s long-term objectives, Mr. Davies commented, “Our success in integrating these two highly accretive acquisitions gives us the confidence to reaffirm our long-term earnings objective while funding a higher level of investment in the business.”

The company’s financial and operating objectives for the three-year period 2003-2005 include: organic sales growth in excess of 5% per year, gross margin improvement of 100-150 basis points per year, EPS growth of 12.5-15% per year.