01—Abstract
Summary
Summary of the 10-Q filed November 2, 2017. Cited figures are marked; the original filing is the authoritative source.
For the nine months ended September 30, 2017, Church & Dwight Co., Inc. (CHD) reported net sales of $2.74 billiona, an increase of 5.6% year-over-year.
This growth was primarily driven by product volume increases and strategic acquisitions, most notably the significant Waterpik acquisition in August 2017. Despite top-line growth, income from operations decreased by 6.0% to $518.0 millionb, attributed to increased marketing and SG&A expenses, particularly those related to recent acquisitions and a pension settlement charge. Diluted earnings per share for the nine-month period stood at $1.32, a slight decrease from the prior year's $1.33.
The company's balance sheet reflects a substantial increase in assets due to acquisitions, with total assets reaching $5.95 billionc. This is accompanied by a significant rise in long-term debt, primarily to finance the Waterpik acquisition.
The company's cash flow from operations remained strong, although lower than the previous year, impacted by changes in working capital. Management anticipates that existing cash, credit facilities, and ongoing operational cash flow will be sufficient to meet its obligations, capital expenditures, and shareholder returns.
02—Key points
Key Highlights
- Net sales increased by 5.6% to $2.74 billion for the first nine months of 2017, driven by volume and acquisitions.
- The company completed the significant acquisition of Waterpik for $1.02 billion in August 2017, funded by senior note issuance.
- Income from operations decreased by 6.0% to $518.0 million, impacted by increased operating expenses and acquisition-related costs.
- Diluted EPS was $1.32 for the nine months ended September 30, 2017, down from $1.33 in the prior year.
- Total assets grew significantly to $5.95 billion primarily due to acquisitions.
- Long-term debt increased substantially to $2.10 billion following the Waterpik acquisition financing.
- Cash flow from operating activities was $424.1 million, a decrease from $495.0 million in the prior year, partly due to working capital changes.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, Church & Dwight Co Inc kept $0.14.
- Revenue$967.9M100.0%
- Cost of revenue−$529.4M54.7%
- Gross profit$438.5M45.3%
- Operating costs−$239.8M24.8%
- Operating income$198.7M20.5%
- Interest, other & tax−$65.3M6.7%
- Net income$133.4M13.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 2, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $967.90M$870.70M | +11.2% |
| Cost of Revenue | $529.40M$475.10M | +11.4% |
| Gross Profit | $438.50M$395.60M | +10.8% |
| R&D Expenses | $18.00M$14.50M | +24.1% |
| SG&A Expenses | $127.90M$101.40M | +26.1% |
| Operating Income | $198.70M$196.00M | +1.4% |
| Interest Expense | $16.40M$6.80M | +141.2% |
| Net Income | $133.40M$124.00M | +7.6% |
| EPS (Basic) | $0.53$0.48 | +10.4% |
| EPS (Diluted) | $0.52$0.47 | +10.6% |
| Shares Outstanding (Basic) | 249.70M258.00M | −3.2% |
| Shares Outstanding (Diluted) | 255.30M262.70M | −2.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of the increase in net sales?
The increase in net sales for the nine months ended September 30, 2017, was driven by a combination of factors including an increase in product volumes sold (5.2%), and the net sales contribution from recently acquired businesses (3.4%), partially offset by unfavorable pricing/product mix (-2.8%) and foreign exchange fluctuations (-0.2%).
How did the Waterpik acquisition impact the company's financial position?
The acquisition of Waterpik significantly increased the company's assets, with total assets rising to $5.95 billion. To finance this acquisition, the company issued $1.425 billion in Senior Notes, leading to a substantial increase in long-term debt to $2.10 billion. Waterpik's results are now consolidated into the Consumer Domestic and Consumer International segments.
What factors led to the decrease in income from operations despite sales growth?
Income from operations decreased by 6.0% for the nine-month period. This was primarily due to a significant increase in Selling, General, and Administrative (SG&A) expenses (+23.6%), which included transition and ongoing costs related to multiple acquisitions (Waterpik, Viviscal, Agro, Anusol) and a substantial international pension settlement charge ($39.2 million). Marketing expenses also increased by 7.3%.
How is the company managing its liquidity and capital resources?
The company maintains a healthy cash position of $236.5 million and has significant availability under its revolving credit facility and commercial paper program. Management expects that cash from operations, combined with borrowing capacity, will be sufficient to cover capital expenditures, share repurchases, and dividends. The company also used proceeds from new debt issuance to pay down existing debt and continues to actively manage its share repurchase programs.
06—Continue