10-QPeriod: Q1 FY2016

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported solid performance for the first quarter ended March 31, 2016, with net sales increasing by 4.5% to $849.0 million and net income rising to $113.0 million, or $0.86 per diluted share. This growth was driven by volume increases in both its Consumer Domestic and Consumer International segments, partially offset by declines in Specialty Products. The company successfully integrated the acquisition of Spencer Forrest, Inc. (TOPPIK) during the quarter, which contributed to sales growth. The company demonstrated effective cost management, with gross margin improving by 80 basis points due to lower commodity costs, despite increased manufacturing and SG&A expenses. Notably, SG&A saw a significant rise (13.1%) primarily due to compensation adjustments related to management transition and acquisition-related costs. Dividends per share increased to $0.355, and the company continued its share repurchase program, buying back approximately 2.2 million shares in the quarter. The company maintains a strong liquidity position and anticipates sufficient cash flow to meet its capital expenditure and dividend obligations.

Financial Highlights

53 data points
Beta

Revenue

$849.00M

44.6% Gross Margin

Net Income

$113.00M

13.3% Net Margin

EPS (Diluted)

$0.43

Total Assets

$4.29B

Cash & Equivalents

$194.30M

Free Cash Flow

$169.30M

Financial Statements
Beta
Revenue$849.00M
Cost of Revenue$470.00M
Gross Profit$379.00M
R&D Expenses$14.40M
SG&A Expenses$107.00M
Operating Income$179.50M
Interest Expense$6.80M
Net Income$113.00M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)258.80M
Shares Outstanding (Diluted)263.60M

Key Highlights

  • 1Net sales increased 4.5% year-over-year to $849.0 million, driven by volume growth in key segments.
  • 2Net income grew to $113.0 million, resulting in diluted EPS of $0.86, up from $0.80 in the prior year.
  • 3Gross margin improved by 80 basis points to 44.6%, benefiting from lower commodity costs.
  • 4Acquisition of Spencer Forrest, Inc. (TOPPIK) was completed on January 4, 2016, contributing to sales.
  • 5Selling, General & Administrative (SG&A) expenses increased by 13.1%, largely due to compensation costs and acquisition-related expenses.
  • 6The company declared a 6% increase in its quarterly dividend to $0.355 per share.
  • 7Cash flow from operations remained strong, increasing to $177.8 million, supported by improved working capital management.

Frequently Asked Questions

The acquisition of TOPPIK, completed on January 4, 2016, contributed 0.9% to the consolidated net sales increase and was a key driver for the Consumer Domestic segment's growth. The company incurred related SG&A costs and preliminary fair value adjustments for the acquired assets, with goodwill recognized at $52.2 million.

SG&A expenses rose by 13.1% due to higher compensation costs, including the timing of stock option grants related to a management transition. Additionally, one-time and ongoing costs associated with the Toppik acquisition contributed to this increase.

The company improved its cash conversion cycle by 3 days to 26 days, primarily driven by a reduction in Days Sales Outstanding (DSO) by 8 days, partly due to factoring of receivables. Days Inventory Outstanding (DIO) increased by 5 days, while Days Payable Outstanding (DPO) remained stable.

Church & Dwight maintains a strong liquidity position with $194.3 million in cash and cash equivalents and significant availability under its credit facilities. The company anticipates sufficient cash flow from operations, combined with borrowing capacity, to fund capital expenditures (estimated at $55.0 million for 2016), share repurchases, and dividends, and potentially pursue strategic acquisitions.