01—Abstract
Summary
Summary of the 10-K filed February 21, 2019. Cited figures are marked; the original filing is the authoritative source.
Church & Dwight Co., Inc. (CHD) demonstrated robust net sales growth of 9.8% in 2018, reaching $4.15 billiona, driven by strong performance across its Consumer Domestic and International segments, notably boosted by the Waterpik acquisition.
Despite this top-line growth, the company experienced a decline in diluted earnings per share (EPS) to $2.27b from $2.90 in the prior year. This decrease was significantly influenced by a $0.91 EPS impact from the Tax Cuts and Jobs Act in the prior year and increased commodity, transportation, and manufacturing costs which compressed gross margins. The company continues to focus on its eleven "power brands," which represent a significant portion of its sales.
Strategic initiatives include maintaining marketing and trade spending, controlling costs, launching new products, and pursuing strategic acquisitions. The company also returned approximately $413.3 millionc to stockholders through dividends and share repurchases, underscoring a commitment to shareholder value. However, the company faces ongoing pricing pressures from competitors and retailers, and its substantial debt load, while managed through a revolving credit facility, warrants investor attention.
02—Key points
Key Highlights
- Net sales increased by 9.8% to $4.15 billion in 2018, driven by acquisitions (Waterpik, Passport) and organic growth in key brands.
- Diluted EPS decreased to $2.27 in 2018 from $2.90 in 2017, impacted by higher costs and the prior year's tax benefits.
- Gross margin declined by 140 basis points due to increased commodity, transportation, and manufacturing costs, partially offset by productivity gains.
- The company returned $413.3 million to stockholders through dividends and share repurchases in 2018.
- Walmart remains the largest customer, accounting for 23% of net sales in 2018, highlighting customer concentration risk.
- The Specialty Products Division (SPD) experienced a slight decline in net sales due to lower volumes in animal productivity products.
- The company successfully managed its liquidity, with $316.7 million in cash and cash equivalents and significant availability under its credit facility at year-end 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Church & Dwight Co Inc kept $0.14.
- Revenue$4.15B100.0%
- Cost of revenue−$2.31B55.6%
- Gross profit$1.84B44.4%
- Operating costs−$1.05B25.3%
- Operating income$791.7M19.1%
- Interest, other & tax−$223.1M5.4%
- Net income$568.6M13.7%
Where FY2018 revenue went
$4.15B- Cost of revenue: $2.31B, 56% of revenue
- Net income: $568.6M, 14% of revenue
- SG&A: $565.9M, 14% of revenue
- R&D: $89.7M, 2.2% of revenue
- Other operating costs: $393.5M, 9.5% of revenue
- Interest, other & tax: $223.1M, 5.4% of revenue
Kept 14% as net incomeR&D $89.7M · 2.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 21, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.15B$3.78B | +9.8% |
| Cost of Revenue | $2.31B$2.05B | +12.6% |
| Gross Profit | $1.84B$1.73B | +6.4% |
| R&D Expenses | $89.70M$70.80M | +26.7% |
| SG&A Expenses | $565.90M$542.70M | +4.3% |
| Operating Income | $791.70M$732.70M | +8.1% |
| Interest Expense | $79.40M$52.60M | +51.0% |
| Net Income | $568.60M$743.40M | −23.5% |
| EPS (Basic) | $2.32$2.97 | −21.9% |
| EPS (Diluted) | $2.27$2.90 | −21.7% |
| Shares Outstanding (Basic) | 245.50M250.60M | −2.0% |
| Shares Outstanding (Diluted) | 250.70M256.10M | −2.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of Church & Dwight's net sales growth in 2018?
Net sales grew by 9.8% to $4.15 billion in 2018. This growth was primarily driven by the acquisitions of Waterpik (completed in August 2017) and Passport Food Safety Solutions (completed in March 2018), along with volume increases in the Consumer Domestic and Consumer International segments for key brands like ARM & HAMMER, BATISTE, and OXICLEAN.
Why did Church & Dwight's earnings per share decline in 2018?
Diluted earnings per share decreased to $2.27 in 2018 from $2.90 in 2017. This was mainly due to increased costs, including higher commodity, transportation, and manufacturing expenses, which compressed gross margins. The prior year's EPS was also significantly boosted by a one-time tax benefit related to the Tax Cuts and Jobs Act.
How is the company managing cost pressures?
Church & Dwight is implementing several strategies to manage cost pressures, including cost reduction programs, productivity improvements, and strategic price increases on approximately 30% of its portfolio. However, the company notes that it cannot be certain that all price increases will be accepted by customers.
What is the company's approach to returning capital to shareholders?
In 2018, Church & Dwight returned $413.3 million to shareholders through dividends and share repurchases. The company declared a 5% increase in its quarterly dividend in February 2019, indicating a commitment to shareholder returns. Additionally, it has an ongoing share repurchase program.
06—Continue