Church & Dwight Reports First Quarter Earnings of $0.66 Per Share

Church & Dwight Co., Inc. (NYSE:CHD) today reported net income for the quarter ended March 30, 2007 of $45.1 million or $0.66 per share, an increase of $0.06 per share or 10% over last year’s $39.9 million or $0.60 per share. First Quarter Review Net sales were $514.3 million in the first quarter, a $71.9 million or 16% increase over last year’s $442.4 million. First quarter sales include the results of the Orange Glo International, Inc. (OGI) laundry additive and household cleaners business, which was acquired in August 2006. Adjusting primarily for revenue related to acquisitions and the net effect of foreign currency changes, organic sales declined for the quarter by approximately 1% compared to the first quarter of 2006. In last year’s first quarter, the Company experienced exceptionally strong sales of liquid laundry detergent as a result of unusually high levels of customer merchandising activity prior to price increases that took effect in the second quarter of 2006. In addition, the year-over-year comparison of organic net sales was also unfavorably influenced by higher slotting costs in support of new product launches in the first quarter of 2007. James R. Craigie, Chairman and Chief Executive Officer, commented, "We are very pleased with our execution of the business plan so far this year, starting with a solid first quarter. As we move through the second quarter, we are continuing our major new product launches and other initiatives, which will require a significant increase in marketing spending. We expect full year 2007 organic sales to be in line with our 3 to 4% long-term business model.” Consumer Domestic sales in the first quarter were $372.4 million, a $58.4 million or 19% increase over the prior year period sales of $314.0 million, primarily due to the addition of the OGI business. Sales of Xtra® liquid laundry detergent, Arm & Hammer Super Scoop® cat litter, and Arm & Hammer® baking soda were all higher than last year’s first quarter. These increases were offset by higher slotting expenses primarily in support of new product launches as well as lower toothpaste and antiperspirant sales. Arm & Hammer® liquid laundry detergent sales were also lower due to the high demand in the prior year quarter in advance of last year’s price increase. Consumer International sales of $84.2 million increased 16% over the prior period, of which 5% is due to foreign currency changes. The balance of the international growth is primarily attributed to the acquired business. The international growth was concentrated in the U.K., Canada and Australia. Specialty Products sales grew 4% due to pricing actions and favorable product mix. Gross margin was 38.9% in the first quarter compared to 38.2% in the prior period. The margin expansion reflects the benefits of price increases taken in the first half of 2006, the higher margins of the acquired OGI business, and cost reduction programs which serve to offset the continuing upward cost pressure for resins, corrugated paper, and certain other raw materials. Marketing expense was $45.9 million in the first quarter, a $12.6 million increase over the prior period partially due to the acquired OGI business. Marketing expense as a percentage of net sales increased to 8.9% in the quarter compared to 7.5% in the prior year period which reflects the planned increase in spending to support the business. Selling, general, and administrative expense was $71.9 million in the first quarter, an $8.6 million increase over the prior period due to the operating expenses of the acquired OGI business, higher amortization expense of intangible assets, and higher legal costs. The combination of higher sales and gross margin expansion, partially offset by higher marketing and higher selling, general and administrative expense resulted in a 14% increase in operating income to $82.1 million in the first quarter compared to $72.3 million in the prior period. Other expense increased to $14.0 million in the first quarter, primarily due to interest associated with borrowings to fund the OGI acquisition. The effective tax rate in the current quarter was 36.0% compared to last year’s 39.7%. The first quarter tax rate includes the benefit of the research and development tax credit which was reinstated by Congress in December 2006. The effective tax rate in last year’s first quarter was unfavorably impacted by the expiration of the research and development tax credit on December 31, 2005. Free Cash Flow and Net Debt At quarter-end, the Company had total outstanding debt of $907 million and cash of $108 million for a net debt position of $799 million. This compares to total debt of $933 million and cash of $110 million for a net debt position at December 31, 2006 of $823 million. The Company generated approximately $18 million in free cash flow during the first quarter of 2007. During the first quarter of 2006, the Company generated approximately $3 million of free cash flow. Free cash flow is defined as cash provided by operating activities less capital expenditures. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as defined in the Company’s principal credit agreement, which excludes certain non-cash items, was approximately $101 million for the first quarter, as compared to $89 million for the prior year period, a 13% increase. New Product Activity On the new product front, Mr. Craigie commented, "We expect 2007 to be another exciting year for Church & Dwight as we drive organic growth through the introduction of new and improved products. The second quarter will be marked by record marketing spending to support our brands and new product launches.” In family planning, there are several new additions to the Trojan® product line, including an Intense Ribbed™ condom and an expanded line of vibrating rings. The Trojan brand will be supported by an innovative new Trojan television campaign which will begin airing later in the second quarter. In skin care, the Nair® depilatory product line has been expanded with the new Nair Pretty™ line, targeted directly to teens, and a new Nair sensitive formula line consisting of 5 new skin-loving products. Nair is being supported with a new "Short-Shorts” television campaign which will air in the second quarter. In oral care, the Company recently launched three new versions of its SpinBrush battery-powered toothbrush, Pro-Recharge™, a rechargeable toothbrush offering one week of power brushing, Pro-Select™, the first and only battery-powered toothbrush with a two-speed switch that allows brushers to choose between a maximum speed "deep clean” and a lower speed "gentle massage” and Slim, a slimmer and lighter product. In household products, the Company began shipping a new OxiClean Spray Away™ portable instant stain remover, for consumers on-the-go. The Company is significantly expanding distribution of Arm & Hammer Essentials™ liquid laundry detergent with plant-based surfactants, and Xtra Lasting ScentSations™, a highly fragranced liquid laundry detergent. Both were previously only available in limited distribution. In addition, an innovative new cat litter product, Odor Alert™, with crystals that change color when activated, has begun shipping in the second quarter. The Company will also be shifting to concentrated liquid laundry detergent in late 2007. Outlook With regard to the full year, Mr. Craigie said, "Because of our confidence in the business and our new product launches, we remain comfortable with our previously announced earnings per share goal of $2.34 to $2.36 which is equivalent to a 13-14% increase over 2006 results. Mr. Craigie continued, "Organic sales growth is expected to be very strong in the second quarter. Marketing expense will be at record levels as a result of our consumer promotion activity, new television campaigns, and our planned new product launches. Consequently, we are expecting earnings per share in the range of $0.57 to $0.59 for the second quarter. In addition, we expect second half earnings to be more evenly distributed in the third and fourth quarters than in prior years.” As previously reported, at its May 2 Board meeting, the Company declared a quarterly dividend of $0.07 cents per share. The dividend will be payable June 1, 2007 to stockholders of record at the close of business on May 14, 2007. This is the Company’s 425th regular quarterly dividend. Church & Dwight will host a conference call to discuss first quarter 2007 results on May 8 at 10:00 a.m. (ET). To participate, dial in at 866-831-5605, access code: 95286767. A replay will be available two hours after the call at 888-286-8010, access code: 27482492, as well as on the Company’s website. Also, you can participate via webcast by visiting the Investor Relations section of the Company’s website at www.churchdwight.com. Church & Dwight Co., Inc. manufactures and markets a wide range of personal care, household and specialty products, under the Arm & Hammer brand name and other well-known trademarks. This release contains forward-looking statements relating, among others, to short- and long-term financial objectives, sales and earnings growth, margin improvement, marketing spending, new product introductions, the timing of new product launches, consumer demand for the Company’s products, the anticipated shift to concentrated liquid laundry detergent and earnings per share. These statements represent the intentions, plans, expectations and beliefs of the Company, and are subject to risks, uncertainties and other factors, many of which are outside the Company’s control and could cause actual results to differ materially from such forward-looking statements. The uncertainties include assumptions as to market growth and consumer demand (including the effect of political and economic events on consumer demand), raw material and energy prices, the financial condition of major customers, and increased marketing spending. With regard to the new product introductions referred to in this release, there is particular uncertainty relating to trade, competitive and consumer reactions. Other factors, which could materially affect the results, include the outcome of contingencies, including litigation, pending regulatory proceedings, and environmental remediation. For a description of additional factors that could cause actual results to differ materially from the forward looking statements, see the Company’s quarterly and annual reports filed with the SEC, including information in the Company’s annual report on Form 10-K in Item 1A, "Risk Factors.” CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited)     Three Months Ended (In thousands, except per share data) Mar. 30, 2007   Mar. 31, 2006 Net Sales $ 514,335  $ 442,391  Cost of sales   314,459      273,399  Gross profit 199,876  168,992  Marketing expenses 45,852  33,324  Selling, general and administrative expenses   71,881      63,348  Income from Operations 82,143  72,320  Equity in earnings of affiliates 2,260  1,660  Other income (expense), net   (13,982)     (7,727) Income before minority interest and taxes 70,421  66,253  Income taxes 25,327  26,306  Minority Interest   5      --  Net Income $ 45,099    $ 39,947  Net Income per share - Basic $0.69  $0.62  Net Income per share - Diluted   $0.66      $0.60  Dividend per share $0.07  $0.06  Weighted average shares outstanding - Basic 65,570  64,478  Weighted average shares outstanding - Diluted   70,024      68,549    CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited)   (Dollars in thousands)   Mar. 30, 2007   Mar. 31, 2006 Assets             Current Assets Cash and cash equivalents $ 107,738  $ 123,041  Accounts receivable 229,708  189,307  Inventories 214,448  180,696  Other current assets     25,483      21,591  Total Current Assets     577,377      514,635  Property, Plant and Equipment (Net) 337,025  328,392  Equity Investment in Affiliates 11,047  10,898  Intangibles and other assets     1,435,222      1,127,395  Total Assets   $ 2,360,671    $ 1,981,320    Liabilities and Stockholders' Equity             Short-Term Debt $ 151,055  $ 133,982  Other Current Liabilities     273,703      258,556  Total Current Liabilities     424,758      392,538  Long-Term Debt 755,827  616,824  Other Long-Term Liabilities 258,279  230,933  Stockholders' Equity     921,807      741,025  Total Liabilities and Stockholders' Equity   $ 2,360,671    $ 1,981,320    SUPPLEMENTAL INFORMATION First Quarter 2007 and 2006 Product Line Net Sales   Three Months Ended Percent 3/30/2007    3/31/2006    Change   Household Products $ 238.9  $ 183.8  30% Personal Care Products $ 133.5    $ 130.2    3% Consumer Domestic $ 372.4  $ 314.0  19% Consumer International $ 84.2    $ 72.8    16% Total Consumer Net Sales $ 456.6  $ 386.8  18% Specialty Products Division $ 57.7    $ 55.6    4% Total Net Sales $ 514.3    $ 442.4    16%   The following discussion reconciles non-GAAP and other measures used in this press release to the most directly comparable GAAP measures: Organic Sales Growth The press release provides information regarding organic sales growth, namely net sales adjusted to eliminate the impact of acquired businesses and the effect of foreign currency changes. Management believes that the presentation of organic sales growth is useful to investors because it enables them to assess, on a consistent basis, sales of products that were marketed by the Company during the entirety of relevant periods. In addition, the exclusion of the effect of foreign currency adjustments is useful to investors because currency fluctuations are out of the control of, and do not reflect the performance of management. Three Months Ended 3/30/2007    Reported Growth 16%   Less: Acquisitions 16%   FX 1%     Organic Growth -1%   Adjusted EBITDA and Free Cash Flow Management believes that Adjusted EBITDA is a useful measure to investors because it indicates the Company’s ability to generate liquidity in a fashion that will enable it to satisfy an important financial covenant in the Company’s principal credit agreement. Set forth below is a reconciliation of the Company’s Adjusted EBITDA to net cash flow provided by operating activities, the most directly comparable GAAP measure. Free cash flow is defined as net cash provided by operating activities less capital expenditures. Management believes that free cash flow is a useful measure to investors of liquidity to reduce debt, invest in growth initiatives, and pay dividends to shareholders.   Adjusted EBITDA   Reconciliation of Net Cash Provided By Operating Activities to Adjusted EBITDA   Three Months Ended (Dollars in Millions) March 30,2007   Net Cash Provided by Operating Activities $ 29.6  Interest Expense 15.2  Current Portion Income Tax Provision 21.2  Change in Working Capital & Other Liabilities 33.2  Investment Income (1.6) Tax Benefit on Stock Options Exercised 3.8  Other   (0.7) Church & Dwight Adjusted EBITDA $ 100.7    Net Cash Provided by Operating Activities $ 29.6  Less: Capital Expenditures   (11.3) Free Cash Flow $ 18.3      Three Months Ended March 31, 2006 Net Cash Provided by Operating Activities $ 13.6  Less: Capital Expenditures   (10.6) Free Cash Flow $ 3.0