10-QPeriod: Q3 FY2015

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 2, 2015For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported its third-quarter and nine-month results for the period ending September 30, 2015. The company demonstrated modest top-line growth, with net sales increasing by 2.4% in the quarter and 3.7% year-to-date. Profitability also saw improvement, with income from operations growing by 7.6% in the third quarter and 5.8% for the first nine months. This performance was driven by a combination of increased product volumes, favorable pricing and product mix, and strategic acquisitions, partially offset by unfavorable foreign exchange rates and increased SG&A expenses. Key financial highlights include a solid gross margin of 44.8% for the quarter, up from 43.7% in the prior year, reflecting improved operational efficiencies and benefits from recent acquisitions. The company also maintained a strong operating margin of 22.1% for the quarter. Despite some cost pressures and the impact of acquisitions, Church & Dwight continues to generate robust operating cash flow, which is being used to fund capital expenditures, dividends, and share repurchases. The company's financial position remains stable, with sufficient liquidity and adherence to its financial covenants.

Financial Highlights

53 data points
Beta

Revenue

$861.80M

44.8% Gross Margin

Net Income

$120.40M

14.0% Net Margin

EPS (Diluted)

$0.45

Total Assets

$4.22B

Cash & Equivalents

$210.60M

Free Cash Flow

$149.70M

Financial Statements
Beta
Revenue$861.80M
Cost of Revenue$476.00M
Gross Profit$385.80M
R&D Expenses$16.00M
SG&A Expenses$102.40M
Operating Income$190.60M
Interest Expense$7.40M
Net Income$120.40M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)262.20M
Shares Outstanding (Diluted)267.20M

Key Highlights

  • 1Net sales increased by 2.4% to $861.8 million for the third quarter of 2015 and by 3.7% to $2,521.2 million for the nine months ended September 30, 2015.
  • 2Income from operations grew by 7.6% to $190.6 million for the third quarter and by 5.8% to $505.0 million for the nine months.
  • 3Gross profit increased by 5.0% to $385.8 million in the third quarter, with gross margin expanding by 110 basis points to 44.8%.
  • 4The company completed the VI-COR Acquisition for $74.9 million in cash on January 2, 2015, adding to its Specialty Products Division.
  • 5Cash Flow from Operations remained strong, totaling $408.8 million for the first nine months of 2015, consistent with the prior year.
  • 6Shareholder returns included dividend payments totaling $131.4 million and significant share repurchases of $263.1 million in the first nine months of 2015.
  • 7The company's leverage ratio was 1.32 as of September 30, 2015, well within the maximum permitted under its Credit Agreement.

Frequently Asked Questions

The company made two acquisitions: the Lil’ Drug Store Brands Acquisition in September 2014 and the VI-COR Acquisition in January 2015. These acquisitions contributed positively to net sales growth, with the VI-COR acquisition adding to the Specialty Products Division (SPD). The acquisitions also had a favorable impact on gross margin, contributing approximately 40 basis points in the third quarter and 50 basis points for the nine-month period.

Marketing expenses decreased slightly by 3.9% in the third quarter and remained flat for the nine-month period as a percentage of net sales, reflecting improved leverage. However, Selling, General & Administrative (SG&A) expenses increased by 9.3% in the third quarter and 8.3% for the nine months. This increase was primarily due to higher compensation costs, IT and R&D expenses, and costs associated with the recent acquisitions. An $8.9 million pension settlement charge in the second quarter also contributed to higher SG&A for the nine-month period.

Consumer Domestic net sales increased by 4.7% in the third quarter and 4.9% year-to-date, driven by strong performance in household products like ARM & HAMMER cat litter and liquid laundry detergent, and personal care items such as BATISTE dry shampoo. Consumer International net sales decreased by 8.4% in the third quarter and 5.2% year-to-date, primarily due to unfavorable foreign exchange rates, although underlying volume and price/mix were positive in most regions. The Specialty Products Division (SPD) saw net sales increase by 2.9% in the third quarter and 9.2% year-to-date, boosted by the VI-COR acquisition and chemicals business, partially offset by lower sales in existing animal nutrition.

The company's net debt increased to $770.4 million as of September 30, 2015, from $672.2 million at the end of 2014, largely due to acquisitions and share repurchases. Despite this, liquidity remains strong with $210.6 million in cash and significant availability under its credit facility and commercial paper program. The company repaid $118.3 million in commercial paper and $3.4 million in short-term borrowings during the first nine months of 2015. It anticipates sufficient cash from operations to repay $250.0 million in Senior Notes due in December 2015.