01—Abstract
Summary
Summary of the 10-Q filed April 29, 2021. Cited figures are marked; the original filing is the authoritative source.
Church & Dwight Co., Inc. (CHD) reported net sales of $1,238.9 milliona for the first quarter ended March 31, 2021, an increase of 6.3% year-over-year.
This growth was driven by increased product volumes across its Consumer Domestic and International segments, alongside a positive pricing/product mix and the inclusion of acquired product lines, notably the Zicam acquisition. Despite a 3.8% decrease in Income from Operations to $302.6 millionb, largely due to a significant increase in SG&A expenses and higher manufacturing costs, the company managed to deliver a diluted Net Income per share of $0.88. The company's balance sheet shows total assets of $7,380.9 million and total liabilities of $4,169.7 million as of March 31, 2021.
Cash flow from operations decreased significantly to $100.2 millionc from $236.5 million in the prior year, primarily due to an increase in working capital, particularly higher inventories and accounts receivable. The company also returned value to shareholders through $61.9 million in cash dividends and continued its share repurchase program.
02—Key points
Key Highlights
- Net sales grew 6.3% to $1,238.9 million, driven by volume increases in Consumer Domestic and International segments, and beneficial price/mix and acquisitions.
- Income from Operations decreased by 3.8% to $302.6 million, impacted by higher SG&A expenses and increased manufacturing costs.
- Diluted EPS was $0.88, a slight decrease from $0.92 in the prior year's first quarter.
- Cash Flow from Operating Activities declined to $100.2 million from $236.5 million, mainly due to increased working capital, particularly higher inventory levels.
- The company paid $61.9 million in cash dividends and continued its share repurchase activities, including an accelerated share repurchase (ASR) program.
- Inventories increased to $541.3 million from $495.4 million, reflecting investments to support expected sales growth.
- SG&A expenses increased significantly by 23.6% to $149.6 million, largely due to Zicam acquisition costs, lower favorable adjustments to business acquisition liabilities, and higher R&D/information systems costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Church & Dwight Co Inc kept $0.18.
- Revenue$1.24B100.0%
- Cost of revenue−$688.0M55.5%
- Gross profit$550.9M44.5%
- Operating costs−$248.3M20.0%
- Operating income$302.6M24.4%
- Interest, other & tax−$81.9M6.6%
- Net income$220.7M17.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed April 29, 2021Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $1.24B$1.17B | +6.3% |
| Cost of Revenue | $688.00M$633.20M | +8.7% |
| Gross Profit | $550.90M$532.00M | +3.6% |
| R&D Expenses | $24.10M$21.70M | +11.1% |
| SG&A Expenses | $149.60M$121.00M | +23.6% |
| Operating Income | $302.60M$314.60M | −3.8% |
| Interest Expense | $14.00M$16.30M | −14.1% |
| Net Income | $220.70M$229.80M | −4.0% |
| EPS (Basic) | $0.90$0.94 | −4.3% |
| EPS (Diluted) | $0.88$0.92 | −4.3% |
| Shares Outstanding (Basic) | 245.20M245.60M | −0.2% |
| Shares Outstanding (Diluted) | 249.80M251.00M | −0.5% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales for the first quarter of 2021?
Net sales increased by 6.3% to $1,238.9 million, primarily due to a 3.1% increase in product volumes, a 1.8% favorable impact from pricing/product mix, and 0.5% from acquired product lines, including the Zicam acquisition. Foreign exchange fluctuations also contributed 0.9% to the increase.
Why did the company's operating income decrease despite sales growth?
Operating income decreased by 3.8% to $302.6 million primarily due to a substantial 23.6% increase in Selling, General, and Administrative (SG&A) expenses to $149.6 million and higher manufacturing costs, which led to a 120 basis point decrease in gross margin. The increase in SG&A was attributed to costs related to the Zicam acquisition, lower favorable adjustments to the Flawless acquisition liability compared to the prior year, and higher information systems and R&D costs.
How did the company's cash flow from operations change, and what were the main drivers?
Cash flow from operating activities decreased significantly by $136.3 million to $100.2 million in the first quarter of 2021, compared to $236.5 million in the prior year. This decline was primarily driven by an increase in working capital, specifically higher inventories (up $46.3 million) to support expected sales growth and increased accounts receivable. The cash conversion cycle also lengthened by 4 days.
What is the company's outlook regarding its Trojan brand's intangible assets?
The company noted that condom usage has declined due to demographic shifts, alternative birth control options, and reduced sexual activity, compounded by increased competition and COVID-19 social distancing measures. This has led to sales and profit declines for the Trojan brand, eroding the excess of its fair value over its carrying value. While management is implementing strategies to address this, there is a risk of a future impairment charge for the Trojan tradename, which has a carrying value of $176.4 million.
06—Continue