Summary
Church & Dwight Co., Inc. (CHD) reported strong financial results for the second quarter and first half of 2018, driven by robust net sales growth and improved operational efficiencies. Net sales increased by 14.5% for the quarter and 14.6% for the six-month period, largely fueled by strategic acquisitions, including the recent Passport acquisition and the significant Waterpik acquisition in the prior year. The company demonstrated strong operational leverage, with income from operations growing by 41.1% for the quarter and 23.4% for the six-month period, leading to a notable increase in diluted EPS. Despite increased commodity and transportation costs impacting gross margin, the company effectively managed operating expenses, particularly SG&A, which decreased as a percentage of net sales due to leverage from higher sales and favorable comparisons to the prior year's pension settlement charge. The company also benefited from a lower effective tax rate following the Tax Cuts and Jobs Act. Management anticipates that cash flow from operations, coupled with available borrowing capacity, will be sufficient to cover capital expenditures, dividends, and potential share repurchases and acquisitions, underscoring a healthy financial position.
Financial Highlights
55 data points| Revenue | $1.03B |
| Cost of Revenue | $573.00M |
| Gross Profit | $454.90M |
| R&D Expenses | $21.80M |
| SG&A Expenses | $144.70M |
| Operating Income | $173.80M |
| Interest Expense | $20.20M |
| Net Income | $121.70M |
| EPS (Basic) | $0.50 |
| EPS (Diluted) | $0.49 |
| Shares Outstanding (Basic) | 244.80M |
| Shares Outstanding (Diluted) | 249.30M |
Key Highlights
- 1Net sales increased by 14.5% year-over-year for the three months ended June 30, 2018, reaching $1,027.9 million, and by 14.6% for the six months ended June 30, 2018, reaching $2,033.9 million.
- 2Income from operations saw significant growth, increasing by 41.1% for the quarter to $173.8 million and by 23.4% for the six months to $394.1 million, indicating strong operational leverage.
- 3Diluted Earnings Per Share (EPS) rose substantially, to $0.49 for the quarter and $1.12 for the six months, compared to $0.29 and $0.79 in the prior year periods, respectively.
- 4The company completed the acquisition of Passport Food Safety Solutions, Inc. in March 2018, adding to its portfolio and contributing to net sales growth.
- 5Gross margin experienced a decline of 140 basis points in the second quarter and 100 basis points year-to-date, primarily due to higher commodity and transportation costs, partially offset by productivity programs.
- 6Selling, General & Administrative (SG&A) expenses as a percentage of net sales decreased significantly, falling by 330 basis points for the quarter and 150 basis points for the six months, demonstrating effective cost management and operating leverage.
- 7The effective tax rate decreased from 37.6% to 21.7% for the quarter and from 33.4% to 21.5% for the six months, mainly due to the Tax Cuts and Jobs Act enacted in December 2017.