10-QPeriod: Q3 FY2016

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 3, 2016For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported solid top-line growth for the nine months ended September 30, 2016, with net sales increasing by 3.0% to $2.6 billion, driven by increased product volumes in its Consumer Domestic and Consumer International segments. The company demonstrated improved profitability, with gross margin expanding by 130 basis points to 45.5% due to lower manufacturing and commodity costs, as well as the favorable impact of a higher-margin acquisition. Net income for the nine-month period rose by 15.7% to $348.6 million, translating to a diluted EPS of $1.33, up from $1.13 in the prior year. Operationally, the company successfully integrated the Toppik acquisition, contributing to net sales, and managed operating expenses effectively, with SG&A as a percentage of net sales decreasing slightly. Cash flow from operations remained robust, increasing by 21.1% to $495.0 million, supporting strategic initiatives such as share repurchases and dividend payments. The company also announced a new $500 million share repurchase program, underscoring its commitment to returning value to shareholders.

Financial Highlights

54 data points
Beta

Revenue

$870.70M

45.4% Gross Margin

Net Income

$124.00M

14.2% Net Margin

EPS (Diluted)

$0.47

Total Assets

$4.28B

Cash & Equivalents

$232.10M

Free Cash Flow

$188.20M

Financial Statements
Beta
Revenue$870.70M
Cost of Revenue$475.10M
Gross Profit$395.60M
R&D Expenses$14.50M
SG&A Expenses$101.40M
Operating Income$196.00M
Interest Expense$6.80M
Net Income$124.00M
EPS (Basic)$0.48
EPS (Diluted)$0.47
Shares Outstanding (Basic)258.00M
Shares Outstanding (Diluted)262.70M

Key Highlights

  • 1Net sales increased by 3.0% to $2.6 billion for the first nine months of 2016, driven by volume growth across key segments.
  • 2Gross margin improved by 130 basis points to 45.5% due to lower manufacturing costs, favorable commodity prices, and the impact of the Toppik acquisition.
  • 3Net income grew by 15.7% to $348.6 million, with diluted EPS rising to $1.33 from $1.13 in the prior year.
  • 4Operating income increased by 9.1% to $550.8 million, reflecting improved gross profit and well-managed operating expenses.
  • 5Cash flow from operations increased significantly by 21.1% to $495.0 million, demonstrating strong cash generation.
  • 6The company successfully integrated the Toppik acquisition, adding to its product portfolio and contributing to net sales.
  • 7A new $500 million share repurchase program was authorized, replacing the previous program and indicating continued capital return to shareholders.

Frequently Asked Questions

Net sales growth was primarily driven by increases in product volumes sold across the Consumer Domestic and Consumer International segments. The acquisition of Toppik also contributed to sales.

Gross margin improved due to several factors including lower manufacturing costs (including productivity programs and the absence of vitamin manufacturing facility start-up costs), lower commodity costs, and the favorable impact of higher-margin products from the acquired Toppik business. These benefits were partially offset by unfavorable price/volume mix and foreign exchange rates.

The company maintained a strong liquidity position with $232.1 million in cash and cash equivalents as of September 30, 2016. It also had approximately $773.0 million available through its revolving credit facility and commercial paper program. The company anticipates its cash from operations and borrowing capacity will be sufficient to meet capital expenditure, share repurchase programs, and dividend payments.

The acquisition of Spencer Forrest, Inc. (Toppik) on January 4, 2016, for approximately $175.5 million, brought in the leading brand of hair building fibers. Toppik's sales of approximately $30.0 million are managed within the Consumer Domestic and Consumer International segments and contributed to higher-margin sales and overall net sales growth.