10-QPeriod: Q1 FY2020

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 30, 2020For Securities:CHD

Summary

In the first quarter of 2020, Church & Dwight Co., Inc. (CHD) demonstrated robust financial performance, with net sales increasing by 11.5% year-over-year to $1.165 billion. This growth was driven by strong volume increases across all segments, particularly in household products, which benefited from increased consumer demand related to the COVID-19 pandemic. Diluted earnings per share (EPS) also saw a significant rise of 31.4% to $0.92, up from $0.70 in the prior year's quarter. The company's financial health was further strengthened by improved operational efficiencies, leading to a 13.0% increase in gross profit and a 30.6% rise in income from operations. Despite initial concerns about the pandemic's impact, CHD proactively increased its cash position by drawing down $825 million from its revolving credit facility, bolstering liquidity to $1.047 billion. The company also maintained its commitment to shareholders by declaring a 5.5% increase in its quarterly dividend.

Financial Highlights

53 data points
Beta

Revenue

$1.17B

45.7% Gross Margin

Net Income

$229.80M

19.7% Net Margin

EPS (Diluted)

$0.92

Total Assets

$7.49B

Cash & Equivalents

$1.05B

Free Cash Flow

$219.70M

Financial Statements
Beta
Revenue$1.17B
Cost of Revenue$633.20M
Gross Profit$532.00M
R&D Expenses$21.70M
SG&A Expenses$121.00M
Operating Income$314.60M
Interest Expense$16.30M
Net Income$229.80M
EPS (Basic)$0.94
EPS (Diluted)$0.92
Shares Outstanding (Basic)245.60M
Shares Outstanding (Diluted)251.00M

Key Highlights

  • 1Net sales grew by 11.5% to $1.165 billion, driven by strong volume increases and beneficial consumer trends related to the COVID-19 pandemic.
  • 2Diluted EPS increased by 31.4% to $0.92, indicating strong profitability from operations.
  • 3Gross profit rose by 13.0% and operating income increased by 30.6%, showcasing effective cost management and operational leverage.
  • 4The company significantly bolstered its cash position, ending the quarter with $1.047 billion in cash and cash equivalents after drawing $825 million on its revolving credit facility as a precautionary measure.
  • 5The Board of Directors declared a 5.5% increase in the regular quarterly dividend, demonstrating confidence in future financial performance and commitment to shareholder returns.
  • 6Marketing expenses as a percentage of net sales decreased by 110 basis points, and SG&A expenses decreased by 220 basis points, contributing to improved operating margins.
  • 7Despite some headwinds in certain personal care categories and the WaterPik business due to COVID-19, overall demand for staple household products remained strong.

Frequently Asked Questions

The COVID-19 pandemic had a mixed but largely positive impact. It drove increased consumer demand for household staple products like laundry detergent, cat litter, and baking soda, as well as certain personal care items such as vitamins and nasal hygiene products. However, some discretionary personal care brands and the WaterPik business experienced negative impacts due to retailer closures and reduced foot traffic. The company took a precautionary measure to increase its cash reserves by drawing on its credit facility.

The primary driver of the 11.5% increase in net sales was a strong increase in product volumes sold across all segments (6.9%), coupled with a favorable pricing/product mix (2.3%). The Flawless Acquisition also contributed positively to net sales, while foreign exchange had a slight negative impact.

Church & Dwight demonstrated effective expense management. Marketing expenses decreased by 1.7% and, as a percentage of net sales, fell by 110 basis points. SG&A expenses decreased by 8.3% and, as a percentage of net sales, fell by 220 basis points. This improved operating leverage contributed significantly to the increase in income from operations.

The company appears to be in a strong liquidity position. As of March 31, 2020, they had $1.047 billion in cash and cash equivalents. They proactively drew $825 million on their revolving credit facility to bolster cash reserves and preserve financial flexibility amidst market uncertainty related to the COVID-19 pandemic. They anticipate that cash holdings, operational cash flow, and remaining borrowing capacity will be sufficient to meet their financial obligations.