01—Abstract
Summary
Summary of the 10-K filed February 16, 2023. Cited figures are marked; the original filing is the authoritative source.
Church & Dwight Co., Inc. (CHD) reported net sales growth of 3.6% to $5.38 billiona for the fiscal year ended December 31, 2022.
This growth was primarily driven by favorable pricing and product mix across its segments, along with contributions from recent acquisitions, notably the Hero Cosmetics acquisition in October 2022. However, the company experienced a significant 49.4% decrease in diluted EPS to $1.68b, largely impacted by a substantial non-cash impairment charge of $411.0 million related to the "Finishing Touch Flawless" intangible assets. Operating margins also declined due to higher manufacturing, commodity, and transportation costs, coupled with unfavorable sales volumes.
The company is navigating a challenging operating environment characterized by persistent supply chain issues, elevated inflation impacting raw materials and labor, and shifts in consumer spending towards value-oriented products. Despite these headwinds, Church & Dwight is focused on strategic initiatives including maintaining competitive marketing spend, controlling costs, expanding online presence, and launching new products. Management is optimistic about its ability to gain market share and expects improved fill rates to continue into 2023, supported by investments in manufacturing capacity.
02—Key points
Key Highlights
- Net sales increased by 3.6% to $5.38 billion, driven by pricing/product mix and strategic acquisitions.
- Diluted EPS significantly decreased by 49.4% to $1.68, largely due to a $411 million impairment charge on the "Finishing Touch Flawless" intangible assets.
- Gross margin declined by 170 basis points to 41.9% due to increased costs for labor, commodities, and transportation, as well as lower sales volumes.
- Operating margin saw a substantial decrease of 970 basis points to 11.1% primarily due to the impairment charge and higher SG&A expenses.
- The company acquired Hero Cosmetics for $546.8 million, adding a new "power brand" to its portfolio.
- Church & Dwight is actively managing inflationary pressures by implementing price increases, although consumer spending on discretionary brands like Waterpik and Finishing Touch Flawless has softened.
- The company returned $255 million to stockholders via cash dividends and continues to have $729.7 million available under its share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Church & Dwight Co Inc kept $0.08.
- Revenue$5.38B100.0%
- Cost of revenue−$3.13B58.1%
- Gross profit$2.25B41.9%
- Operating costs−$1.65B30.7%
- Operating income$597.8M11.1%
- Interest, other & tax−$183.9M3.4%
- Net income$413.9M7.7%
Where FY2022 revenue went
$5.38B- Cost of revenue: $3.13B, 58% of revenue
- Other operating costs: $836.2M, 16% of revenue
- SG&A: $706.0M, 13% of revenue
- Net income: $413.9M, 7.7% of revenue
- R&D: $110.0M, 2.0% of revenue
- Interest, other & tax: $183.9M, 3.4% of revenue
Kept 7.7% as net incomeNet income $413.9M · 7.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 16, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $5.38B$5.19B | +3.6% |
| Cost of Revenue | $3.13B$2.93B | +6.8% |
| Gross Profit | $2.25B$2.26B | −0.6% |
| R&D Expenses | $110.00M$105.20M | +4.6% |
| SG&A Expenses | $706.00M$606.70M | +16.4% |
| Operating Income | $597.80M$1.08B | −44.6% |
| Interest Expense | $89.60M$54.50M | +64.4% |
| Net Income | $413.90M$827.50M | −50.0% |
| EPS (Basic) | $1.70$3.38 | −49.7% |
| EPS (Diluted) | $1.68$3.32 | −49.4% |
| Shares Outstanding (Basic) | 242.90M244.90M | −0.8% |
| Shares Outstanding (Diluted) | 246.30M249.60M | −1.3% |
05—Questions
Frequently Asked Questions
What was the impact of the Hero Cosmetics acquisition on Church & Dwight's financials?
The acquisition of Hero Cosmetics was completed on October 13, 2022, for $546.8 million. Hero's annual net sales for 2022 were approximately $179.0 million. The acquisition was financed with cash on hand and commercial paper borrowings and is managed within the Consumer Domestic segment. It contributed to sales growth in the Consumer Domestic segment.
What caused the significant decrease in net income and EPS?
The primary driver for the substantial decrease in net income and diluted EPS was a non-cash impairment charge of $411.0 million recognized in the fourth quarter of 2022 related to the "Finishing Touch Flawless" intangible assets. This impairment was due to the discontinuance of certain products at a major retailer and expectations of continued decline in discretionary consumption.
How is the company addressing inflationary pressures and supply chain challenges?
Church & Dwight is addressing inflationary pressures by implementing price increases across many of its products to offset rising costs for labor, raw materials, and transportation. To mitigate supply chain challenges and meet consumer demand, the company is increasing short-term manufacturing capacity, working with suppliers, and investing in long-term capacity expansion. Management expects these challenges to continue at least through the first half of 2023.
How did the company's segments perform in 2022?
The Consumer Domestic segment saw a net sales increase of 4.8% driven by acquisitions and growth in brands like ARM & HAMMER Liquid Detergent and BATISTE dry shampoo, although it was partially offset by declines in FINISHING TOUCH FLAWLESS and VITAFUSION/L’IL CRITTERS vitamins. The Consumer International segment experienced a slight decrease of 1.8% in net sales, primarily due to unfavorable foreign exchange rates. The Specialty Products Division (SPD) reported a 3.7% increase in net sales, mainly due to higher pricing in response to rising costs.
06—Continue