EPS OF $0.85 EXCEEDS OUTLOOK
Q2 REPORTED EPS GROWTH OF 54.5%; ADJUSTED
GROWTH OF 16.4%
MAINTAINS FULL YEAR REPORTED AND ORGANIC
SALES OUTLOOK
RAISES GROSS MARGIN AND MARKETING SPEND
OUTLOOK
UPDATES FULL YEAR EPS OUTLOOK
DECLARES DIVIDEND AND ANNOUNCES TWO-FOR-ONE
STOCK SPLIT
Church & Dwight Co., Inc. (NYSE:CHD):
2016 Second Quarter Results 2016 Full Year Outlook
- Reported sales growth of 3.6%; Organic growth of 3.7%
- Reported/Organic sales maintained at 3-4%
- Gross Margin expansion of 250 basis points
- Gross Margin expansion of 110 basis points
- Reported EPS growth of 54.5%; Adjusted 16.4%
- Reported EPS growth 14-15%; Adjusted 8-9%
- Currency neutral adjusted EPS growth of 17.8%
- Cash from operations of $640MM
Church & Dwight Co., Inc. (NYSE:CHD) today announced second
quarter 2016 EPS of $0.85 per share, a 54.5% increase or a 16.4%
increase on an adjusted basis over the prior year quarter exceeding
the Company’s prior outlook. Driven by 3.7% organic sales growth
and gross margin expansion, this equates to 17.8% currency neutral
adjusted EPS growth. Organic sales growth for the global consumer
business was 4.9%. Adjusted EPS results excludes both a pension
settlement charge ($0.05) and an impairment charge ($0.13)
associated with the Company’s investment in a joint venture in
2015.
Second quarter 2016 reported net sales increased $30.3 million
or 3.6% to $877.4 million. 3.7% organic sales growth was driven by
volume growth of 3.1% and 0.6% from favorable product mix and
pricing.
Matthew T. Farrell, President and Chief Executive Officer,
commented, “We are extremely pleased with our sales and earnings
growth as our strong momentum has continued. Our first half gross
margin expansion gives us flexibility with respect to our second
half marketing and promotional investments. We continue to believe
that innovation is the key to increasing our market share and have
launched new products in many of our major categories including
BATISTE, the #1 global dry shampoo, and ARM & HAMMER bi-layer
and dual chamber unit dose laundry detergent.”
Second Quarter Review
Consumer Domestic reported net sales were $669.8 million,
a $31.5 million or 4.9% increase. Organic sales increased by 4.4%
primarily due to VITAFUSION gummy vitamins, BATISTE dry shampoo and
OXICLEAN additives while partially offset by a decline in KABOOM
cleaners. Our ARM & HAMMER unit dose laundry detergent grew
twice the unit dose category growth rate in the quarter and also
increased share. This is a result of our bi-layer and dual chamber
unit dose laundry detergent launches along with increased display
support and distribution. Sales were strong in unmeasured channels,
especially in club and online. In particular, online vitamin sales
more than doubled versus last year. Volume growth contributed 3.9%
to organic sales, while product mix and pricing added 0.5%. Four of
the ten powerbrands gained share in the quarter.
Consumer International reported net sales were $136.4
million, a $5.5 million or 4.2% increase. Organic sales increased
7.4%, driven largely by higher sales in Australia, Mexico, Canada
and the Export business. Volume increased 5.9%, while favorable
product mix and pricing contributed 1.5%.
Specialty Products reported net sales were $71.2 million,
a $6.7 million or an 8.6% decrease. Organic sales decreased by 7.7%
as milk prices continue to hover at historical lows. The low prices
are due to an excess global supply of milk and weak exports due to
a strong dollar.
Gross margin increased 250 basis points to 46.5%. The
gross margin increase was broad-based including higher volume,
lower commodities, productivity programs, absence of vitamin
start-up at the York manufacturing facility, lower promotional
support, and the impact of the higher margin acquired business.
Marketing expense was $120.2 million, an increase of $4.4
million or 3.8%. Marketing expense as a percentage of net sales was
consistent with prior year at 13.7%.
Selling, general, and administrative expense (SG&A)
was $112.5 million or 12.8% of net sales, a 70 basis point decline
on a reported basis primarily due to the 2015 pension settlement
charge. On an adjusted basis, SG&A increased 30 basis points,
primarily due to costs associated with the Toppik business.
Income from Operations on a reported basis was $175.3
million or 20.0% of net sales, a 320 basis point increase. On an
adjusted basis, operating income increased 220 basis points.
The effective tax rate was 34.7%, compared to 38.3% last
year. The Company now expects the full year effective tax rate to
be approximately 35% (compared to previous outlook of 34.7%).
Operating Cash Flow
For the first six months of 2016, net cash from operating
activities was $296.5 million; a $48.1 million increase from the
prior year primarily due to higher cash earnings and a smaller
increase in working capital. Capital expenditures for the first six
months were $17.8 million, a $16.2 million decrease from the prior
year when the company was completing the York vitamin plant.
At June 30, 2016, cash on hand was $210.8 million, while total
debt was $1,082.3 million. The Company continues to have
significant financial flexibility for acquisitions.
Regular Quarterly Dividend and
Two-for-One Stock Split
On August 3, 2016, the Company’s Board of Directors approved a
regular quarterly dividend of thirty-five and a half cents ($0.355)
per share. Additionally, the Board approved a two-for-one stock
split of the Company's common stock, payable in the form of a stock
dividend.
"We are pleased to report our 462nd consecutive quarterly
dividend and our first stock split since 2011, said Mr. Farrell.
The stock split recognizes our strong market performance.
Additionally, we believe that the stock split will make our stock
more attractive to a broader investor base."
The quarterly cash dividend and the stock dividend will both be
payable on September 1, 2016 to stockholders of record at the close
of business on August 15, 2016. In addition to the quarterly cash
dividend on a pre-split basis, stockholders will receive one
additional share of common stock for each share of common stock
they own.
The New York Stock Exchange is expected to begin reporting the
adjusted number of shares outstanding and the split-adjusted
per-share stock price on September 2, 2016. The split will increase
Church & Dwight's total shares outstanding from approximately
129 million shares to approximately 258 million shares.
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 while continuing to support prior year launches. One
specific example is our new ARM & HAMMER bi-layer and dual
chamber unit dose laundry detergents which, despite aggressive
competition, grew twice the unit dose category growth rate and
increased share in the second quarter. Additional launches include
ARM & HAMMER CLUMP & SEAL MICROGUARD clumping cat litter,
an entirely new beauty line of adult vitamins under the VITAFUSION
brand, a new GROOVE condom and new RIVIERA lubricant each under the
TROJAN brand and PREGNANCY PRO, the only pregnancy test kit with
bluetooth technology, under the FIRST RESPONSE brand. We also have
new offerings and distribution of the BATISTE dry shampoo brand
which continues to grow its #1 global share position.”
Outlook for 2016
Mr. Farrell stated, “We have had excellent first half 2016
results. 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 business environment continues to be challenging, we
are confident in achieving our 2016 business targets.”
With regard to 2016, Mr. Farrell said, “We continue to expect
reported and organic sales growth of approximately 3-4% supported
by our new product introductions in our core business and improved
category growth. We now expect gross margin to expand by
approximately 110 basis points (75 basis points previously) due to
continued lower commodity costs and greater distribution
efficiencies. In order to increase second half trial on new
products and enter 2017 with strong momentum, we will be making
incremental investments in trade and couponing in the second half.
We are increasing our marketing investment spending to
approximately 12.4% of sales, a 10 basis point increase over 2015.
SG&A, adjusted for the 2015 pension settlement charge, is now
forecasted to increase by 40 basis points (25 basis points
previously) as a percentage of sales. The 15 basis point increase
is primarily due to higher medical costs and incentive
compensation. We now expect to achieve approximately 60 basis
points of operating margin expansion.”
Mr. Farrell said, “We believe that 2016 will be an exciting year
for Church & Dwight based on our current momentum and category
strength, success of our innovations, and confidence in gross
margin expansion. We now expect 14 to 15% reported and 8 to 9%
adjusted EPS growth as we increase our investments in marketing and
promotions. The 2016 EPS outlook also reflects a higher effective
tax rate. This outlook is top tier within the consumer packaged
goods industry.
For the third quarter, we expect reported and organic sales
growth of approximately 1-2% behind stronger promotions and a more
difficult year over year comparison for the International division.
We expect marketing as a percentage of revenue to increase in both
dollars and as a percentage of sales as we begin to spend back our
gross margin expansion. Reported EPS is expected to be $0.92 which
equates to a 2% increase over the prior quarter which reflects the
step up in marketing, promotional activities, and a slightly higher
SG&A due to incentive compensation and a higher tax rate.”
Church & Dwight Co., Inc. will host a conference call to
discuss second quarter 2016 results on August 4, 2016 at 10:00 a.m.
(ET). To participate, dial in at 877-322-9846, access code:
43404617 (International: 631-291-4539, same access code:
43404617). A replay will be available two hours after the
call at 855-859-2056 or 404-537-3406 (same access code:
43404617. 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 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; the Company’s
investments in joint ventures; the impact of acquisitions; capital
expenditures; the impact of the two-for-one stock split; and the
Company’s effective tax rate. 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 (Henkel)
entry into the U.S. premium laundry detergent category; Henkel’s
announced acquisition of Sun Products Co., Inc.; 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; implications of the
United Kingdom’s withdrawal from the European Union; 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 Six Months
Ended (In millions, except per share data)
June 30,
2016 June 30, 2015
June 30, 2016
June 30, 2015
Net Sales $ 877.4 $ 847.1
$ 1,726.4 $ 1,659.4 Cost of sales
469.4 474.0
939.4
930.8
Gross Profit 408.0 373.1
787.0 728.6 Marketing expenses
120.2 115.8
212.7 204.6 Selling, general and administrative expenses
112.5 115.0
219.5 209.6
Income from Operations
175.3 142.3
354.8 314.4 Equity in earnings of
affiliates
2.5 (13.8 )
4.2 (11.5 ) Other income
(expense), net
(6.8 )
(9.0 )
(15.0 ) (18.1 )
Income before Income Taxes
171.0 119.5
344.0 284.8
Income taxes
59.4 45.8
119.4 103.9
Net Income
$ 111.6 $ 73.7
$ 224.6
$ 180.9
Net Income per share - Basic $
0.87 $ 0.56
$ 1.74 $ 1.38
Net Income per
share - Diluted $ 0.85 $ 0.55
$ 1.71 $ 1.35 Dividends per share
$ 0.355 $ 0.335
$ 0.71 $ 0.67 Weighted
average shares outstanding - Basic
128.5 130.9
129.0
131.4 Weighted average shares outstanding - Diluted
130.9 133.4
131.4
134.0
CHURCH & DWIGHT
CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)
June 30, 2016
Dec. 31, 2015
Assets
Current Assets
Cash and Cash Equivalents
$ 210.8 $ 330.0
Accounts Receivable
278.9 276.2 Inventories
290.3
274.0 Other Current Assets
37.9
25.8
Total Current Assets 817.9
906.0 Property, Plant and Equipment (Net)
594.6 609.6
Equity Investment in Affiliates
9.1 8.4 Trade Names and
Other Intangibles
1,364.4 1,269.5 Goodwill
1,406.3
1,354.9 Other Long-Term Assets
117.9
108.5
Total Assets $ 4,310.2
$ 4,256.9
Liabilities and Stockholders’ Equity
Short-Term Debt
$
381.6 $ 357.2 Other Current Liabilities
545.3 515.5
Total Current Liabilities
926.9 872.7 Long-Term Debt
700.7 692.8 Other Long-Term Liabilities
670.7 668.2
Stockholders’ Equity
2,011.9
2,023.2
Total Liabilities and Stockholders’ Equity
$ 4,310.2 $ 4,256.9
CHURCH
& DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flow (Unaudited)
Six Months Ended (Dollars in millions)
June 30, 2016 June 30, 2015
Net
Income $ 224.6 $ 180.9 Depreciation and
amortization
54.4 51.4 Deferred income taxes
14.2
10.6 Non cash compensation
12.3 12.4 Asset impairment charge
and other asset write-offs
0.9 17.4 Pension charge
-
8.4 Other
(0.5 ) 0.7 Changes in assets and
liabilities: Accounts receivable
0.3 (22.9 ) Inventories
(9.3 ) (27.6 ) Other current assets
(1.9
) 0.8 Accounts payable and accrued expenses
20.1 12.6
Income taxes payable
0.2 20.1 Excess tax benefit on stock
options exercised
(18.2 ) (10.7 ) Other
(0.6 ) (5.7 )
Net cash from
operating activities 296.5 248.4 Capital
expenditures
(17.8 ) (34.0 ) Acquisitions
(175.5 ) (74.9 ) Other
(0.3
) (2.0 )
Net cash (used in) investing
activities (193.6 ) (110.9 ) Net change in
short-term debt
23.8 (23.0 ) Payment of cash dividends
(91.7 ) (87.5 ) Stock option related
47.6 26.4
Purchase of treasury stock
(200.0 ) (263.1 ) Other
(5.3 ) (0.7 )
Net cash
(used in) financing activities (225.6 ) (347.9 )
F/X impact on cash 3.5
(9.4 )
Net change in cash and cash equivalents
$ (119.2 ) $ (219.8 )
2016 and 2015
Product Line Net Sales
Three Months Ended Percent 6/30/2016
6/30/2015
Change Household Products $ 397.8
$ 390.9 1.8 %
Personal Care Products 272.0
247.4 9.9 %
Consumer Domestic $ 669.8 $
638.3 4.9 % Consumer International
136.4 130.9
4.2 % Total Consumer Net Sales $
806.2 $ 769.2 4.8 % Specialty
Products Division 71.2
77.9 -8.6 % Total Net
Sales $ 877.4 $ 847.1
3.6 % Six Months
Ended Percent 6/30/2016
6/30/2015 Change Household
Products $ 786.1 $ 757.4 3.8
% Personal Care Products 531.5
495.5 7.3 %
Consumer Domestic $ 1,317.6 $
1,252.9 5.2 % Consumer International
263.8 251.3
5.0 % Total Consumer Net Sales $
1,581.4 $ 1,504.2 5.1 %
Specialty Products Division 145.0
155.2 -6.6
% Total Net Sales $ 1,726.4
$ 1,659.4 4.0
%
Non-GAAP Measures:
The following discussion addresses the non-GAAP measures used in
this press release and reconciliations of these non-GAAP measures
to the most directly comparable GAAP measures. These non-GAAP
financial measures should not be considered in isolation from or as
a substitute for the 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, excluding the impact of
acquisitions and excluding 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 2015
pension termination charge and the 2015 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 useful perspective of
underlying business trends and results and provides useful
supplemental information regarding our year over year earnings per
share growth.
Currency Neutral Adjusted EPS:
Currency neutral adjusted EPS is a measure of the Company's
adjusted EPS, excluding the impact of foreign exchange as well as
the 2015 pension settlement charge and the 2015 Natronx impairment
charge. We believe that this metric further enhances investors’
understanding of the Company’s year over year earnings per share
growth, by excluding foreign exchange rate changes that are out of
the control of, and do not reflect the performance of the Company
and management.
Adjusted SG&A:
This press release presents the Company’s outlook for growth in
Adjusted SG&A. Adjusted SG&A, as used in this press
release, is defined as selling, general and administrative expenses
excluding the 2015 pension settlement charge. We believe that this
metric further enhances investors’ understanding of the Company’s
year over year expenses, excluding certain significant one-time
items.
Adjusted Operating Income and Margin:
We believe that excluding the 2015 pension settlement charge
from operating income and margin provides a useful measure of the
Company’s ongoing operating performance growth by excluding a
significant one-time event.
CHURCH & DWIGHT CO., INC. Organic Sales
Three Months Ended 6/30/2016
Total Worldwide Consumer
Consumer Specialty Company Consumer
Domestic International Products Reported
Sales Growth 3.6% 4.8% 4.9% 4.2%
-8.6% Less: Acquisitions 0.9%
1.0% 0.8% 1.9% 0.0% Add: FX /
Other 1.0% 1.1% 0.3%
5.1% 0.9% Organic Sales
Growth 3.7% 4.9% 4.4%
7.4% -7.7% Six Months Ended
6/30/2016 Total Worldwide Consumer
Consumer Specialty Company Consumer
Domestic International Products Reported
Sales Growth 4.0% 5.1% 5.2% 5.0%
-6.6% Less: Acquisitions 0.9%
0.9% 0.9% 1.7% 0.0% Add: FX /
Other 1.3% 1.2% 0.1%
6.9% 1.8% Organic Sales
Growth 4.4% 5.4% 4.4%
10.2% -4.8% CHURCH
& DWIGHT CO., INC. Adjusted EPS and Currency Neutral
EPS Three Months Three Months ended
ended June 30, 2016 June 30, 2015 Reported
Vs. PY
Reported
Adjustments Adjusted
Net Sales $ 877.4 $ 847.1
$ 847.1 Gross Profit 408.0
373.1 373.1 % of Sales 46.5 %
44.0 % 44.0 % Marketing
Expenses 120.2 115.8 115.8
Selling, General and Administrative Expenses
112.5 115.0 (8.9 )
(1) 106.1 Operating Profit
175.3 142.3 8.9 151.2 % of Sales
20.0 % 16.8 % 17.8 %
Other Income/(Expense) (4.3 )
(22.8 ) 17.0 (2)
(5.8 ) Income Before Taxes 171.0
119.5 25.9 145.4 Income Taxes
59.4 45.8 (2.3 ) 48.1 Tax
Rate 34.7 % 38.3 %
33.1 % Net Income
$ 111.6 $ 73.7 $ 23.6
$ 97.3 Diluted EPS $ 0.85
+16.4% $ 0.55 $ 0.18 $
0.73 Currency Impact to EPS $
0.01 $ - Currency Neutral Adjusted
EPS $ 0.86 +17.8% $ 0.73
(1) 2015 Adjusted results exclude a Pension Settlement
Charge of $8.9 million. (2) 2015 Adjusted results exclude
Natronx Impairment Charge of $17.0 million.
CHURCH & DWIGHT CO., INC.
Forecasted SG&A Expenses as Percent of Net Sales
Year Ending Year Ending December 31, 2016
December 31, 2015 Change Reported
(GAAP) 12.5% 12.4% +10 bps 2015
Pension Settlement Charge 0 -0.3% +30
bps Adjusted (Non GAAP) 12.5%
12.1% +40 bps Forecasted Operating
Profit Margin Growth Year Ending December 31,
2016 Reported (GAAP) +90 bps
2015 Pension Settlement Charge -30 bps
Adjusted (Non-GAAP) + 60 bps
CHURCH & DWIGHT CO., INC. Forecasted EPS and Adjusted
EPS Growth Range for the Year Ending December 31,
2016 For the Year ended December 31, 2015 Per
Share Per Share Percent Change
Forecasted EPS Reported Basis (GAAP) $
3.50 $ 3.54 EPS Reported (GAAP)
$ 3.07 14% to 15% 2015 Pension Plan
Charge $ - $ - 2015 Pension Plan
Charge $ 0.05 2015 Natronx Impairment
Charge $ - $ - 2015 Natronx
Impairment Charge $ 0.13
Forecasted EPS Reported Basis (GAAP) $
3.50 $ 3.54
Adjusted EPS (Non-GAAP)
$ 3.25 8% to 9%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160804005624/en/
Church & Dwight Co., Inc.Rick Dierker, 609-806-1900Chief
Financial Officer
Church and Dwight (NYSE:CHD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Church and Dwight (NYSE:CHD)
Historical Stock Chart
From Apr 2023 to Apr 2024