10-QPeriod: Q3 FY2017

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:CHD

Summary

For the nine months ended September 30, 2017, Church & Dwight Co., Inc. (CHD) reported net sales of $2.74 billion, 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 million, 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 billion. 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.

Financial Highlights

54 data points
Beta

Revenue

$967.90M

45.3% Gross Margin

Net Income

$133.40M

13.8% Net Margin

EPS (Diluted)

$0.52

Total Assets

$5.95B

Cash & Equivalents

$236.50M

Free Cash Flow

$164.30M

Financial Statements
Beta
Revenue$967.90M
Cost of Revenue$529.40M
Gross Profit$438.50M
R&D Expenses$18.00M
SG&A Expenses$127.90M
Operating Income$198.70M
Interest Expense$16.40M
Net Income$133.40M
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)249.70M
Shares Outstanding (Diluted)255.30M

Key Highlights

  • 1Net sales increased by 5.6% to $2.74 billion for the first nine months of 2017, driven by volume and acquisitions.
  • 2The company completed the significant acquisition of Waterpik for $1.02 billion in August 2017, funded by senior note issuance.
  • 3Income from operations decreased by 6.0% to $518.0 million, impacted by increased operating expenses and acquisition-related costs.
  • 4Diluted EPS was $1.32 for the nine months ended September 30, 2017, down from $1.33 in the prior year.
  • 5Total assets grew significantly to $5.95 billion primarily due to acquisitions.
  • 6Long-term debt increased substantially to $2.10 billion following the Waterpik acquisition financing.
  • 7Cash flow from operating activities was $424.1 million, a decrease from $495.0 million in the prior year, partly due to working capital changes.

Frequently Asked Questions

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%).

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.

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%.

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.