10-QPeriod: Q1 FY2023

CHURCH & DWIGHT CO INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 27, 2023For Securities:CHD

Summary

Church & Dwight Co., Inc. (CHD) reported solid revenue growth in the first quarter of 2023, with net sales increasing by 10.2% year-over-year to $1.43 billion. This growth was driven by a combination of favorable pricing/product mix and contributions from acquired product lines, notably the Hero Cosmetics acquisition, which is showing positive integration. Despite broad-based cost inflation impacting manufacturing and commodities, the company successfully expanded its gross margin by 90 basis points, primarily through pricing strategies, productivity initiatives, and lower transportation costs. While net income slightly decreased to $203.2 million from $204.4 million in the prior year, diluted EPS remained strong at $0.82. The company demonstrated effective operational management by increasing marketing spend to support improved fill rates and successfully managing Selling, General & Administrative (SG&A) expenses, which were impacted by acquisition-related costs. The company also reported a healthy increase in cash flow from operations, up $120.3 million year-over-year, indicating strong cash generation capabilities to fund ongoing operations, dividends, and strategic initiatives, including a remaining $729.7 million authorization for share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$1.43B

43.5% Gross Margin

Net Income

$203.20M

14.2% Net Margin

EPS (Diluted)

$0.82

Total Assets

$8.27B

Cash & Equivalents

$202.80M

Free Cash Flow

$248.10M

Financial Statements
Beta
Revenue$1.43B
Cost of Revenue$807.80M
Gross Profit$622.00M
R&D Expenses$26.70M
SG&A Expenses$207.80M
Operating Income$291.90M
Interest Expense$28.80M
Net Income$203.20M
EPS (Basic)$0.83
EPS (Diluted)$0.82
Shares Outstanding (Basic)243.80M
Shares Outstanding (Diluted)246.80M

Key Highlights

  • 1Net sales increased 10.2% to $1.43 billion, driven by pricing/product mix and acquisitions (Hero Cosmetics).
  • 2Gross margin improved by 90 basis points to 43.5%, benefiting from pricing strategies and productivity despite cost inflation.
  • 3Net income was $203.2 million, with diluted EPS at $0.82, a slight decrease from the prior year.
  • 4Operating income grew by 4.0% to $291.9 million, though operating margin slightly decreased due to increased marketing and SG&A expenses.
  • 5Cash flow from operating activities significantly increased by $120.3 million to $273.1 million, showing strong operational cash generation.
  • 6The company repaid $200.0 million of its term loan, demonstrating active debt management.
  • 7Remaining share repurchase authorization stands at $729.7 million, indicating continued commitment to returning capital to shareholders.

Frequently Asked Questions

The Hero Cosmetics acquisition, completed in October 2022, contributed 5.2% to the net sales increase in the first quarter of 2023. While acquisition-related costs contributed to higher SG&A expenses, the acquisition is being integrated and is expected to drive future growth, particularly within the Consumer Domestic segment.

Church & Dwight acknowledges ongoing supply chain issues, including raw material and labor shortages, and significant broad-based cost inflation. While they expect pricing and productivity to offset inflation in the near term, these pressures are expected to continue. The company is monitoring inflation and recessionary indicators closely and believes its value-focused portfolio positions it well in challenging economic environments.

The company repaid $200.0 million of its term loan in the first quarter of 2023, reducing its outstanding debt. As of March 31, 2023, CHD had $202.8 million in cash and cash equivalents and approximately $1.48 billion available through its revolving credit facility and commercial paper program, indicating strong liquidity. The company anticipates sufficient cash flow from operations and borrowing capacity to fund share repurchases, dividends, and capital expenditures.

The company has significant intangible assets, including goodwill and trade names. While the annual goodwill impairment test in 2022 did not indicate impairment, the company noted potential susceptibility to impairment for the TROJAN® and WATERPIK® trade names due to declining sales and profitability in those specific segments. The company is implementing strategies to address these declines, but future impairments could occur if these strategies are unsuccessful or if market conditions worsen.