01—Abstract
Summary
Summary of the 10-K filed February 18, 2020. Cited figures are marked; the original filing is the authoritative source.
Church & Dwight Co., Inc. (CHD) reported solid performance in its 2019 10-K filing, demonstrating resilience and strategic growth.
The company achieved a 5.1% increase in net sales, reaching $4.36 billiona, driven by strong performance in its Consumer Domestic and International segments, bolstered by the acquisition of the Flawless hair removal business. Gross margin improved by 110 basis points to 45.5%, reflecting effective productivity programs and favorable pricing/product mix, partially offset by rising commodity and manufacturing costs. Diluted EPS saw a 7.5% increase to $2.44, indicating efficient operations and effective cost management.
The company continues to focus on its 12 "power brands," which include well-known names like ARM & HAMMER, OXICLEAN, and TROJAN. Strategic initiatives for the upcoming year include maintaining competitive marketing and trade spending, cost control, new product development, and pursuing strategic acquisitions. Despite facing intense competition and pricing pressures, CHD's diversified portfolio, focus on innovation, and return of capital to shareholders through dividends and share repurchases position it for continued success.
The company remains committed to sustainability, a key element of its corporate strategy. Financially, CHD managed its debt effectively, with a debt-to-capitalization ratio of 44%b.
The company generated strong operating cash flow and returned approximately $474 millionc to shareholders via dividends and buybacks in 2019. Management expressed confidence in its ability to meet capital expenditure needs, debt obligations, and dividend payments, supported by its ongoing operational performance and available credit facilities.
02—Key points
Key Highlights
- Net sales increased by 5.1% to $4.36 billion in 2019, driven by volume, pricing/product mix, and strategic acquisitions.
- Gross margin improved by 110 basis points to 45.5% due to productivity gains and favorable mix, despite higher commodity costs.
- Diluted Earnings Per Share (EPS) grew by 7.5% to $2.44, reflecting strong operational execution.
- The Flawless hair removal business acquisition in May 2019 contributed to sales growth in Consumer Domestic and International segments.
- The company returned $474.1 million to stockholders through dividends and share repurchases.
- Walmart remains the largest customer, representing 24% of net sales in 2019, highlighting concentration risk.
- The company maintains a strong commitment to sustainability, recognized by third-party lists and integrated into its business strategy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Church & Dwight Co Inc kept $0.14.
- Revenue$4.36B100.0%
- Cost of revenue−$2.37B54.5%
- Gross profit$1.98B45.5%
- Operating costs−$1.14B26.2%
- Operating income$840.2M19.3%
- Interest, other & tax−$224.3M5.1%
- Net income$615.9M14.1%
Where FY2019 revenue went
$4.36B- Cost of revenue: $2.37B, 54% of revenue
- SG&A: $628.8M, 14% of revenue
- Net income: $615.9M, 14% of revenue
- R&D: $93.6M, 2.1% of revenue
- Other operating costs: $421.4M, 9.7% of revenue
- Interest, other & tax: $224.3M, 5.1% of revenue
Kept 14% as net incomeR&D $93.6M · 2.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 18, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.36B$4.15B | +5.1% |
| Cost of Revenue | $2.37B$2.31B | +3.0% |
| Gross Profit | $1.98B$1.84B | +7.8% |
| R&D Expenses | $93.60M$89.70M | +4.3% |
| SG&A Expenses | $628.80M$565.90M | +11.1% |
| Operating Income | $840.20M$791.70M | +6.1% |
| Interest Expense | $73.60M$79.40M | −7.3% |
| Net Income | $615.90M$568.60M | +8.3% |
| EPS (Basic) | $2.50$2.32 | +7.8% |
| EPS (Diluted) | $2.44$2.27 | +7.5% |
| Shares Outstanding (Basic) | 246.20M245.50M | +0.3% |
| Shares Outstanding (Diluted) | 252.10M250.70M | +0.6% |
05—Questions
Frequently Asked Questions
What were the key drivers of Church & Dwight's net sales growth in 2019?
Church & Dwight's net sales grew by 5.1% in 2019, primarily driven by a 3.4% favorable pricing/product mix, a 1.0% increase in product volumes sold, and a 1.2% contribution from acquired product lines, notably the Flawless hair removal business. International sales and specific brands like ARM & HAMMER liquid detergent and WATERPIK also performed well.
How did the Flawless acquisition impact the company's financial performance?
The acquisition of the Flawless and Finishing Touch hair removal business on May 1, 2019, contributed positively to sales growth in both the Consumer Domestic and Consumer International segments. It also impacted gross margin positively due to its higher margin profile, though it also brought associated acquisition-related costs, including amortization and contingent consideration adjustments, which affected SG&A expenses.
What is the company's outlook and strategy moving forward?
Church & Dwight plans to maintain competitive marketing and trade spending, tightly control costs, continue developing and launching innovative products, and pursue strategic acquisitions. The company aims to grow its product sales globally and maintain a portfolio of both premium and value brands to appeal to a wide range of consumers. They are also focused on strengthening their key power brands through product innovation and increased marketing support.
What are the main risks facing Church & Dwight?
Key risks highlighted include intense competition leading to pricing pressures, reliance on a few major customers (particularly Walmart), potential increases in raw material and energy costs, and evolving consumer preferences. The company also faces risks related to its international operations, including currency fluctuations and geopolitical factors, as well as potential disruptions to its supply chain and IT systems. Product liability claims and regulatory changes are also noted risks.
06—Continue