Church & Dwight Reports 2007 Earnings of $2.46 Per Share

PRINCETON, N.J., Feb 05, 2008 (BUSINESS WIRE) -- Church & Dwight Co., Inc. (NYSE:CHD) today announced that full-year 2007 sales increased 14% to $2,220.9 million from $1,945.7 million in 2006. Organic sales growth for 2007 was approximately 5%, adjusting for revenue related to acquisitions and foreign exchange. 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 compared to $186 million in 2006, and free cash flow (cash from operations less capital expenditures) was up 44% to $200 million versus $139 million in the prior year.

James R. Craigie, Chairman and Chief Executive Officer, commented, "We accomplished several important objectives in 2007. We delivered solid organic revenue growth, successfully completed the integration of the business we acquired from Orange Glo International ("OGI"), and continued to generate significant free cash flow. In 2008, we expect to continue to deliver improvement in shareholder value with another strong year marked by organic revenue growth, gross margin expansion, and strong free cash flow."

Fourth Quarter Review

Net income was $31.7 million in the fourth quarter or $0.46 per share, an increase of $0.10 per share from the prior period's net income of $23.9 million or $0.36 per share. This year's fourth quarter results include a $3.5 million charge relating to the reorganization of the Company's Canadian business and trademark impairment charges of $4.2 million related to certain international brands. Last year's results included $12.9 million of charges related to trademark impairments and a loss on the sale of a small U.S. plant.

Net sales for the fourth quarter increased 10% to $579.7 million. Organic sales, which exclude the impact of foreign exchange, increased by approximately 9% for the quarter.

Consumer Domestic sales in the fourth quarter were $407.8 million, a 6% increase over the prior period sales of $383.3 million. Sales of Arm & Hammer Super Scoop(R: 56.92, -0.10, -0.17%) cat litter, Trojan(R: 56.92, -0.10, -0.17%) condoms, SpinBrush(R: 56.92, -0.10, -0.17%) battery-powered toothbrushes, First Response(R: 56.92, -0.10, -0.17%) pregnancy test kits, Arm & Hammer(R: 56.92, -0.10, -0.17%) toothpaste, and Nair(R: 56.92, -0.10, -0.17%) 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 fourth quarter sales of $99.5 million increased 13% over the prior period sales, of which 10% was primarily due to foreign currency changes. Specialty Products fourth quarter 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% in the fourth quarter compared to 38.8% in the prior period due to business mix. The Consumer Domestic business, which represents 70% of CHD's total net revenues, increased gross margin by 70 basis points in the quarter as a result of OGI manufacturing synergies and cost-reduction programs which offset higher raw material costs. Consumer International gross margin, excluding the Canadian reorganization costs, was comparable to the prior period. The Specialty Products division, which represents 12% of total net sales, had a significant decrease in gross margin due to higher raw material costs which were partially offset by a raw material indexed surcharge implemented during the third quarter of this year.

Marketing expense was $75.1 million in the fourth quarter, an $8.6 million increase over the prior period. Marketing expense as a percentage of net sales increased to 13.0% in the quarter compared to 12.6% in the prior period. The Company launched Arm & Hammer with Oxi Clean Liquid Laundry Detergent in the fourth quarter with significant marketing support which will continue in early 2008.

Selling, general, and administrative expense was $89.1 million in the fourth quarter, a $4.6 million decrease over the prior period. The fourth quarter 2007 results include $6.7 million of trademark impairment and reorganization costs. The prior period results include $11.6 million of trademark impairment charges.

Operating income increased by approximately 30% to $57.7 million in the fourth quarter compared to $44.2 million in the prior period.

Other expense was $11.0 million in the fourth quarter compared to $14.2 million in the prior period due to reduced interest expense and higher interest income.

The effective tax rate in the fourth quarter was 35.5% compared to last year's 25.1%. The prior period effective tax rate was significantly lower than 2007 because it included the full-year benefit of the research and development tax credit which was reinstated by Congress in December 2006.

New Product Activity

On the new product front, Mr. Craigie commented, "We expect 2008 to be another solid year of organic growth for Church & Dwight driven by an impressive pipeline of new and improved products."

In family planning, there will be new additions to the Trojan product line, including the launch of Thintensity and Magnum Thin, capitalizing on the growing "thin" segment of the condom category. In addition, in the first quarter of 2008, First Response is launching a digital pregnancy test kit and a daily ovulation test kit.

In oral and skin care, the Company will be expanding its Nair depilatory product line with Nair Shower Power, a convenient way to remove hair in the shower, and Nair Soothing Wax strips. The Company will also be introducing three new SpinBrush products in the battery-powered toothbrush category, and launching two new oral care products under the Arm & Hammer name: Age Defying toothpaste, to protect and rebuild enamel; and Whitening Booster, an additive used with any toothpaste for convenient whitening.

In Household products, the Company recently launched Arm & Hammer Laundry Detergent with Oxi Clean stain fighters in both powdered and liquid form. This product combines the deodorization and cleaning power of Arm & Hammer Laundry Detergent with the powerful stain fighting benefits of Oxi Clean. The Company is also introducing Arm & Hammer Essentials Free liquid laundry detergent made from plant-based soaps. Finally, the Company will be expanding distribution of its newest cat litter, Arm & Hammer Odor Alert. Arm & Hammer Odor Alert is the only cat litter that turns the clumps blue, making it easier for consumers to find and remove the source of the odor.

During the quarter, Church & Dwight completed the first wave of shipments of concentrated liquid laundry detergent and the Company is encouraged by the response of consumers. The speed of conversion and initial sales reports for the Company's brands are positive. The second wave began on January 21 in the midwest and northwest, and the final wave will commence in early April in the northeastern U.S.

Outlook for 2008

With regard to 2008, Mr. Craigie said, "We concluded 2007 with strong momentum and expect another strong year in 2008. Despite continuing commodity cost pressures and a slowing economy, we are comfortable at this point with an earnings per share goal of $2.77, which is an increase of approximately 13% over 2007 results. This earnings growth will be driven by solid organic revenue growth and gross margin expansion. In particular, the benefits that we expect from liquid laundry detergent concentration, OGI business manufacturing integration synergies, February 2008 price increases on Trojan condoms, Arm & Hammer baking soda and Arm & Hammer cat litter, and our cost-reduction programs should enable us to increase our gross margin by 100 basis points and further increase our marketing spending to build our brand equity."

As previously reported, at its January 30th Board meeting, the Company declared a quarterly dividend of $0.08 cents per share. The dividend will be payable March 3, 2008 to stockholders of record at the close of business on February 11, 2008. This is the Company's 428th consecutive regular quarterly dividend.

Church & Dwight will host a conference call to discuss the fourth quarter and full year 2007 results on February 5 at 12:30 p.m. (ET). To participate, dial in at 888-680-0869, access code: 36528604. A replay will be available two hours after the call at 888-286-8010, access code: 95136110, 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.

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