10-QPeriod: Q1 FY2018

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported a strong first quarter for 2018, demonstrating significant top-line growth and improved profitability. Net sales increased by 14.7% year-over-year to $1,006.0 million, driven by robust volume growth and contributions from recent acquisitions, notably Waterpik and Passport. Profitability also saw a notable improvement, with Net Income rising to $157.8 million, or $0.63 per diluted share, up from $131.5 million, or $0.51 per diluted share, in the prior year. This growth was supported by increased operating income and a significantly lower effective tax rate due to the Tax Cuts and Jobs Act. The company also continued its commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$1.01B

44.9% Gross Margin

Net Income

$157.80M

15.7% Net Margin

EPS (Diluted)

$0.63

Total Assets

$5.94B

Cash & Equivalents

$119.80M

Free Cash Flow

$145.60M

Financial Statements
Beta
Revenue$1.01B
Cost of Revenue$554.50M
Gross Profit$451.50M
R&D Expenses$19.50M
SG&A Expenses$131.30M
Operating Income$220.30M
Interest Expense$20.10M
Net Income$157.80M
EPS (Basic)$0.64
EPS (Diluted)$0.63
Shares Outstanding (Basic)244.90M
Shares Outstanding (Diluted)250.00M

Key Highlights

  • 1Net sales surged 14.7% to $1,006.0 million, driven by volume growth and acquisitions.
  • 2Net income increased to $157.8 million, and diluted EPS grew to $0.63 from $0.51.
  • 3Gross margin decreased slightly by 60 basis points to 44.9%, primarily due to increased commodity and transportation costs, partially offset by productivity gains and higher margins from acquired businesses.
  • 4Operating expenses, including marketing and SG&A, increased due to acquisition-related costs and investments, but marketing expense as a percentage of sales decreased.
  • 5The effective tax rate decreased significantly to 21.4% from 30.9% due to the Tax Cuts and Jobs Act.
  • 6The company completed the acquisition of Passport Food Safety Solutions for approximately $50.0 million.
  • 7Significant share repurchases totaling $200.0 million were executed, alongside a 14% increase in the quarterly dividend.

Frequently Asked Questions

The primary drivers for the 14.7% increase in net sales to $1,006.0 million were a 4.0% increase in product volumes sold, a 1.3% positive impact from foreign exchange rates, and a substantial 9.6% contribution from net sales of acquired product lines. Recent acquisitions such as Waterpik and Passport were key contributors to this growth.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly lowered the U.S. corporate income tax rate from 35% to 21%. This resulted in a substantial decrease in Church & Dwight's effective tax rate for the first quarter of 2018 to 21.4%, compared to 30.9% in the prior year, which favorably impacted net income.

Church & Dwight remains committed to returning capital to shareholders. In the first quarter of 2018, the company increased its regular quarterly dividend by 14% and repurchased $200.0 million of its common stock. The company anticipates its cash from operations and borrowing capacity will be sufficient to fund capital expenditures, dividends, and share repurchase programs.

Recent acquisitions, including Waterpik and Passport, contributed significantly to net sales growth. However, these acquisitions also led to increased Selling, General & Administrative (SG&A) expenses due to transition and ongoing costs. While gross margin was slightly impacted by acquisition-related costs, the overall profitability improved due to strong sales and the lower tax rate.