Organic Sales Growth of 5.2% and EPS of
$0.86 Exceed Outlook
Raises Full Year Organic Sales and Gross
Margin Outlook
Maintains 7-9% Adjusted EPS Growth behind
Incremental SG&A Investments
Church & Dwight Co., Inc. (NYSE:CHD):
2016 First Quarter Results 2016 Full Year
Outlook
- Organic sales growth of 5.2%; reported growth of 4.5%
- Organic sales growth raised to 3-4%
- Gross Margin expansion of 80 basis points
- Gross Margin expansion of 75 basis points
- Reported EPS growth of 7.5%
- Adjusted EPS growth of 7-9%; reported 13-15%
- Currency neutral EPS up 10.0%
- Cash from operations of $630MM
Church & Dwight Co., Inc. (NYSE:CHD) today announced first
quarter 2016 reported EPS of $0.86 per share, a 7.5% increase over
the prior year first quarter exceeding the Company’s prior outlook.
Driven by strong organic sales growth and gross margin expansion,
this equates to 10.0% currency neutral EPS growth.
First quarter 2016 reported net sales increased $36.7 million or
4.5% to $849.0 million. Organic sales growth for the first quarter
2016 was 5.2% driven by volume growth of 5.6%, and partially offset
by 0.4% from unfavorable product mix and pricing.
Matthew Farrell, Chief Executive Officer, commented, “We are
extremely pleased with the sales and earnings growth as our strong
momentum in late 2015 has continued into early 2016. We continue to
believe that innovation is the key to increasing our market share
and have launched innovative new products in many of our major
categories including BATISTE, the #1 global dry shampoo. In support
of our brands, we increased our marketing spend in the first
quarter of 2016, as 6 of the 10 powerbrands gained share.”
First Quarter Review
Consumer Domestic net sales were $647.8 million, a $33.2
million or 5.4% increase over the prior year first quarter. First
quarter organic sales increased by 4.5%, primarily due to strong
growth of ARM & HAMMER liquid laundry detergent, VITAFUSION
gummy vitamins, BATISTE dry shampoo, the continued success of the
ARM & HAMMER CLUMP & SEAL cat litter franchise, including
the new MICROGUARD product, partially offset by a decline in L’IL
CRITTERS gummy vitamins. In addition to strong consumption and
continued share growth above category rates of ARM & HAMMER in
both the laundry detergent category and clumping litter segment,
there was broad brand growth across the portfolio. Volume growth
contributed 5.7% to organic sales, while product mix and pricing
declined 1.2%.
Consumer International net sales were $127.4 million, a
$7.0 million or 5.8% increase compared to prior year first quarter
sales. Organic sales increased 13.3%, driven largely by higher
sales in Europe, Mexico and Canada. Volume increased 9.6%, while
favorable product mix and pricing contributed 3.7%.
Specialty Products net sales were $73.8 million, a $3.5
million or 4.6% decrease from the prior year first quarter sales.
Organic sales decreased by 2.0% with volume declining 1.4% and
unfavorable product mix and pricing of 0.6%. The lower organic
sales were primarily driven by the impact of further declines in
milk pricing and a strong year ago results comparison (+11% organic
sales in Q1 2015).
Gross margin increased 80 basis points to 44.6%. The
gross margin benefited primarily from lower commodities,
productivity programs and the impact of higher margin acquired
businesses partially offset by foreign exchange and higher fixed
costs associated with the new vitamin capacity in our York
manufacturing facility.
Marketing expense was $92.5 million, an increase of $3.7
million or 4.2% in comparison to the prior year first quarter.
Marketing expense as a percentage of net sales was consistent with
prior year at 10.9%.
Selling, general, and administrative expense (SG&A)
was $107.0 million or 12.6% of net sales. This 90 basis point
increase was primarily due to incremental amortization from an
acquisition and the timing of stock option grants related to
management transition.
Income from Operations was $179.5 million, a $7.4 million
or 4.3% increase (+7.5% on a currency neutral basis). Operating
income as a percentage of net sales was 21.1%, a 10 basis point
decrease.
The effective tax rate in the first quarter was 34.7%,
compared to 35.1% last year. The company now expects the full year
effective tax rate to be approximately 34.7% (compared to previous
outlook of 34.5%).
Operating Cash Flow
For the first three months of 2016, net cash from operating
activities was approximately $178 million; a $33 million increase
from the prior year primarily due a reduction in working capital
and higher cash earnings. Capital expenditures for the first three
months were $8.5 million, a $13.4 million decrease from the prior
year when we were completing the York vitamin plant.
At March 31, 2016, cash on hand was $194 million, while total
debt was $1.2 billion. The Company continues to have significant
financial flexibility for acquisitions.
2016 New Products
Mr. Farrell commented, “innovation continues to be a big driver
of our success. In support of our long term strategy to drive
revenue and earnings growth, we have launched innovative new
products across every one of our megabrands while continuing to
support prior year launches. One specific example is our new ARM
& HAMMER CLUMP & SEAL MICROGUARD clumping cat litter launch
which continues to drive share increases despite aggressive
competition. Additional launches are new dual chamber unit dose
laundry detergent in our ARM & HAMMER and OXICLEAN laundry
franchises, an entirely new beauty line of adult vitamins under the
VITAFUSION brand, a new GROOVE condom and new RIVIERA lubricant
under the TROJAN brand and PREGNANCY PRO, the only pregnancy test
kit with bluetooth technology, under the FIRST RESPONSE brand. We
have new offerings and distribution of the BATISTE dry shampoo
brand which continues to grow its global share position.”
Outlook for 2016
Mr. Farrell stated, “2016 is off to a strong start with solid
first quarter results. We believe that we are positioned to
continue to deliver strong sales and earnings growth with our
balanced portfolio of value and premium products, the launch of
innovative new products, aggressive productivity programs and tight
management of overhead costs. Although the 2016 business
environment will be extremely challenging with continued
competitive pressure, we are confident in achieving our 2016
business targets.”
With regard to 2016, Mr. Farrell said, “We now expect organic
sales growth of approximately 3-4% (3% previously) supported by our
new product introductions on our core business and improved
category growth. We now expect gross margin to expand by
approximately 75 basis points (40 basis points previously) from
lower commodity costs, productivity programs and the reduction of
vitamin start-up costs. We are maintaining marketing spending at
approximately 12.3% of sales, consistent with 2015. SG&A,
adjusted for the 2015 pension settlement charge, is now forecasted
to increase by 25 basis points as a percentage of sales as we make
incremental R&D, IT and International sales force
infrastructure investments. We continue to expect to achieve
approximately 50 basis points of operating margin expansion. In
2016, we again expect to deliver approximately 125% free cash flow
compared to net income.”
In conclusion, Mr. Farrell said, “We believe that 2016 will be
an exciting year for Church & Dwight based on our current
growth momentum and category strength, continued focus on
innovation, and confidence in gross margin expansion. We continue
to expect 7 to 9% adjusted EPS growth. The 2016 outlook midpoint
equates to 10% currency neutral EPS growth excluding an estimated
2% negative impact from foreign exchange. This outlook is top tier
within the consumer packaged goods industry.
For the second quarter, we expect organic sales growth of
approximately 2-3%, margin expansion and earnings per share of
$0.79 which equates to an 8% increase over last year’s adjusted
earnings per share of $0.73. The prior year adjusted EPS excluded a
pension settlement charge ($0.05) and an impairment charge ($0.13)
associated with the Company’s investment in Natronx Technologies,
LLC. On a reported basis, earnings per share is expected to
increase 44%.”
Church & Dwight Co., Inc. will host a conference call to
discuss first quarter 2016 results on May 5, 2016 at 10:00 a.m.
(ET). To participate, dial in at 877-322-9846, access code:
78737573 (International: 631-291-4539, same access code:
78737573). A replay will be available two hours after the
call at 855-859-2056 or 404-537-3406 (same access code:
78737573. You also can participate via webcast by visiting
the Investor Relations section of the Company’s website at
www.churchdwight.com.
Church & Dwight Co., Inc. manufactures and markets a wide
range of personal care, household and specialty products under the
ARM & HAMMER brand name and other well-known trademarks.
This Press Release contains forward-looking statements,
including, among others, statements relating to net sales and
earnings growth; gross margin changes; trade and marketing
spending; marketing expense as a percentage of net sales;
sufficiency of cash flows from operations; earnings per share; cost
savings programs; consumer demand and spending; the effects of
competition; the effect of product mix; volume growth, including
the effects of new product launches into new and existing
categories; the impact of competitive laundry detergent products,
including unit dose laundry detergent; the Company’s hedge
programs; the impact of foreign exchange and commodity price
fluctuations; actual voluntary and expected cash contributions to
pension plans; impairments and other charges including the pension
settlement charge and trade name impairment charges; the Company’s
investments in joint ventures; the impact of acquisitions; capital
expenditures; the Company’s effective tax rate; the impact of tax
audits; tax changes and the lapse of applicable statutes of
limitations; the effect of the credit environment on the Company’s
liquidity and capital resources; the Company’s fixed rate debt;
compliance with covenants under the Company’s debt instruments; the
Company’s commercial paper program; the Company’s current and
anticipated future borrowing capacity to meet capital expenditure
program costs; the Company’s share repurchase programs; payment of
dividends; environmental and regulatory matters; and the
availability and adequacy of raw materials, including trona
reserves. These statements represent the intentions, plans,
expectations and beliefs of the Company, and are based on
assumptions that the Company believes are reasonable but may prove
to be incorrect. In addition, these statements are subject
to risks, uncertainties and other factors, many of which are
outside the Company’s control and could cause actual results to
differ materially from such forward-looking statements.
Factors that could cause such differences include a decline in
market growth, retailer distribution and consumer demand (as a
result of, among other things, political, economic and marketplace
conditions and events); unanticipated increases in raw material and
energy prices; delays or other problems in manufacturing or
distribution; adverse developments affecting the financial
condition of major customers and suppliers; competition, including
The Procter & Gamble Company’s participation in the value
laundry detergent category and Henkel AG & Co. KGaA’s entry
into the U.S. premium laundry detergent category; changes in
marketing and promotional spending; growth or declines in various
product categories and the impact of customer actions in response
to changes in consumer demand and the economy, including increasing
shelf space of private label products; consumer and competitor
reaction to, and customer acceptance of, new product introductions
and features; the Company’s ability to maintain product quality and
characteristics at a level acceptable to our customers and
consumers; disruptions in the banking system and financial markets;
foreign currency exchange rate fluctuations; issues relating to the
Company’s information technology and controls; the impact of
natural disasters on the Company and its customers and suppliers,
including third party information technology service providers; the
acquisition or divestiture of assets; the outcome of contingencies,
including litigation, pending regulatory proceedings and
environmental matters; and changes in the regulatory
environment.
For a description of additional factors that could cause
actual results to differ materially from the forward looking
statements, please see Item 1A, “Risk Factors” in the Company’s
annual report on Form 10-K.
This press release also contains non-GAAP financial
information. Management uses this information in its
internal analysis of results and believes that this information may
be informative to investors in gauging the quality of the Company’s
financial performance, identifying trends in its results and
providing meaningful period-to-period comparisons. The Company has
included reconciliations of these non-GAAP financial measures to
the most directly comparable financial measure calculated in
accordance with GAAP. See the end of this press release for these
reconciliations. These non-GAAP financial measures should not be
considered in isolation or as a substitute for the comparable GAAP
measures. In addition, these non-GAAP financial measures may not be
the same as similar measures provided by other companies due to
potential differences in methods of calculation and items being
excluded. They should be read in connection with the Company’s
financial statements presented in accordance with GAAP.
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Income (Unaudited)
Three Months Ended March 31, March 31,
(In millions, except per share data)
2016 2015
Net Sales $
849.0 $ 812.3 Cost of sales
470.0 456.8
Gross
Profit 379.0 355.5 Marketing expenses
92.5 88.8
Selling, general and administrative expenses
107.0 94.6
Income from Operations 179.5 172.1 Equity in earnings
of affiliates
1.7 2.3 Other income (expense), net
(8.2 ) (9.1
) Income before Income Taxes
173.0 165.3 Income taxes
60.0 58.1
Net Income $
113.0 $ 107.2
Net Income per share -
Basic $ 0.87 $ 0.81
Net Income per share -
Diluted $ 0.86
$ 0.80 Dividends per share
$ 0.355 $
0.335 Weighted average shares outstanding - Basic
129.4
132.0 Weighted average shares outstanding - Diluted
131.8 134.6
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)
Mar. 31, 2016 Dec.
31, 2015
Assets
Current Assets
Cash and
Cash Equivalents
$ 194.3 $ 330.0 Accounts Receivable
277.0 276.2 Inventories
291.0 274.0 Other Current
Assets
23.2
25.8
Total Current Assets
785.5 906.0 Property, Plant and
Equipment (Net)
601.1 609.6 Equity Investment in Affiliates
8.0 8.4 Trade names and Other Intangibles
1,375.8
1,269.5 Goodwill
1,407.1 1,354.9 Other Long-Term Assets
114.8
108.5
Total Assets
$ 4,292.3 $ 4,256.9
Liabilities and
Stockholders’ Equity
Short-Term Debt
$ 451.3 $
357.2 Other Current Liabilities
561.5 515.5
Total Current
Liabilities 1,012.8
872.7 Long-Term Debt
699.8 692.8 Other
Long-Term Liabilities
659.4 668.2 Stockholders’ Equity
1,920.3
2,023.2
Total Liabilities and Stockholders’ Equity
$ 4,292.3 $
4,256.9
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flow (Unaudited)
Three Months Ended March 31, March 31,
(Dollars in millions)
2016
2015
Net Income $
113.0 $ 107.2 Depreciation and amortization
27.9 26.0 Deferred income taxes
7.6 6.0 Non cash
compensation
5.8 1.7 Other
1.2 3.9 Changes in
assets and liabilities: Accounts receivable
5.2 (22.0 )
Inventories
(8.7 ) (15.2 ) Other current assets
(1.7 ) (1.3 ) Accounts payable and accrued expenses
(5.5 ) (2.5 ) Income taxes payable
42.4 48.3
Excess tax benefit on stock options exercised
(7.9 )
(8.0 ) Other
(1.5
) 0.1
Net cash from operating
activities 177.8 144.2 Capital expenditures
(8.5 ) (21.9 ) Acquisition
(175.0 )
(74.9 ) Other
(0.6
) (1.1 )
Net cash (used in) investing
activities (184.1 ) (97.9 ) Net change in
short-term debt
93.8 127.1 Payment of cash dividends
(46.1 ) (43.7 ) Stock option related
21.2 19.3
Purchase of treasury stock
(200.0 ) (256.2 ) Other
(5.0 )
(0.4 )
Net cash (used in) financing activities
(136.1 ) (153.9 )
F/X impact on cash
6.7
(15.7 )
Net change in cash and cash equivalents
$ (135.7 )
$ (123.3 )
2016 and 2015
Product Line Net Sales
Three Months
Ended Percent 3/31/2016
3/31/2015 Change Household
Products $ 388.3 $ 366.5
5.9 % Personal Care Products
259.5 248.1 4.6
% Consumer Domestic $ 647.8 $
614.6 5.4 % Consumer International
127.4 120.4
5.8 % Total Consumer Net Sales $
775.2 $ 735.0 5.5 % Specialty
Products Division 73.8 77.3
-4.6 % Total Net Sales $
849.0 $ 812.3 4.5
%
The following discussion addresses the non-GAAP measures used in
this press release and reconciliations of non-GAAP measures to the
most directly comparable GAAP measures. The following non-GAAP
measures may not be the same as similar measures provided by other
companies due to differences in methods of calculation and items
and events being excluded.
Organic Sales Growth:
This press release provides information regarding organic sales
growth, namely net sales growth excluding the effect of
acquisitions and foreign exchange rate changes. Management believes
that the presentation of organic sales growth is useful to
investors because it enables them to assess, on a consistent basis,
sales trends related to products that were marketed by the Company
during the entirety of relevant periods and foreign exchange rate
changes that are out of the control of, and do not reflect the
performance of, the Company and management.
Adjusted EPS:
This press release also presents reported EPS excluding a
pension termination charge and the Natronx impairment charge,
namely, earnings per share calculated in accordance with GAAP
adjusted to exclude significant one-time items that is not
indicative of the Company’s period to period performance. We
believe that this metric provides investors a more meaningful
perspective of underlying business trends and results and provides
a more comparable measure of year over year earnings per share
growth.
Currency Neutral EPS:
Currency neutral EPS is a measure of the Company's EPS,
excluding the impact of foreign exchange. We believe that this
metric further enhances investors’ understanding of the Company’s
year over year earnings per share growth.
Free Cash Flow:
Free cash flow is defined as cash from operating activities less
capital expenditures. Management views free cash flow as an
important measure because it is one factor in determining the
amount of cash available for dividends and discretionary
investment.
Free Cash Flow as Percent of Net Income:
Free cash flow as percent of net income is defined as the ratio
of free cash flow to net income. Management views this as a measure
of how effective the Company manages its cash flow relating to
working capital and capital expenditures.
CHURCH & DWIGHT CO., INC.
Organic Sales
Three Months Ended 3/31/2016
Total
Worldwide Consumer Consumer Specialty
Company Consumer Domestic International
Products Reported Sales Growth 4.5 %
5.5 % 5.4 % 5.8 %
-4.6 % Less: Acquisitions 0.9
% 1.0 % 0.9 % 1.4
% 0.0 % Add: FX / Other
1.6 % 1.4 % 0.0
% 8.9 % 2.6 %
Organic Sales Growth 5.2 %
5.9 % 4.5 %
13.3 % -2.0 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505005739/en/
Church & Dwight Co., Inc.Rick Dierker, 609-806-1900Chief
Financial Officer
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