Press Releases
Church & Dwight Reports Q3 Results
2020 Third Quarter Results
- Sales growth +13.9%
- Organic sales +9.9%
- Gross Margin -110 bps. to 45.5%, due to tariffs and acquisition accounting
- EPS +37.1%; Adjusted EPS +6.1%
- YTD Cash from Operations +29.3%
2020 Full Year Outlook
- Reported Sales growth raised to 11% (previously 9-10%)
- Organic Sales growth raised to 9% (previously 7-8%)
- Adjusted EPS growth raised to 13%-14% 1, including investments
- Cash from Operations raised to $975MM (previously $960MM)
Third quarter net sales grew 13.9% to
“In this unusual time, our focus is on the safety of our employees, meeting the needs of our customers and consumers, and ensuring our brands are even stronger moving forward. I want to again thank
Third Quarter Review
Consumer Domestic net sales were
Specialty Products net sales were
Gross margin decreased 110 basis points to 45.5% due to the impact of tariffs, COVID-19 pandemic related expenses, higher manufacturing costs due to outsourcing, and acquisition accounting, partially offset by productivity improvements. Specifically, gross margin was impacted by a 200 basis point headwind in the quarter, from the year-over-year impact of tariffs (-110 basis points), and acquisition accounting (-90 basis points).
Marketing expense was
Selling, general, and administrative expense (SG&A) was
Income from Operations was
Other Expense of
The effective tax rate was 17.3% compared to 21.6% in 2019, a decrease of 430 basis points, primarily driven by higher tax benefits related to stock option exercises.
Operating Cash Flow
Cash flow continues to be exceptionally strong. For the first nine months of 2020, cash from operating activities increased 29.3% to
At
2020 New Products
Outlook for 2020
“Given our strong year to date performance, we have raised our full year outlook for sales, EPS, and cash flow. We now expect approximately 11% full year 2020 sales growth (previously 9-10%) and approximately 9% organic sales growth (previously 7-8%). Our cash from operations is now expected to be
“We will continue to make incremental investments in Q4 as a result of our strong results. As in years past, these actions help the Company enter the coming year with momentum. Specifically, we expect significantly higher marketing spending, investments for surge capacity in manufacturing, R&D, new product development, consumer research, digital advertising, and predictive analytics. These investments have historically proven to position the Company for future growth.
“We expect gross margin to contract 20 basis points for the full year due to tariffs on
“In Q4, we expect reported sales growth of approximately 9%, organic sales growth of approximately 8%, gross margin contraction, significantly higher marketing expense, and a lower tax rate. As a result, we expect Q4 EPS to be
1 |
This press release does not provide a forward-looking reconciliation of adjusted EPS to reported EPS, the most directly comparable GAAP financial measure, expected for 2020 or the fourth quarter of 2020, because we are unable to provide such a reconciliation without unreasonable effort. We have excluded the Company’s potential earn-out liability from our acquisition of the FLAWLESS business from our expected adjusted EPS for these periods. We are required to review the fair value of the earn-out liability quarterly based on changes in sales forecasts, discount rates, volatility assumptions, and other inputs. Our inability to provide a reconciliation to GAAP EPS for future periods is due to the uncertainty and inherent difficulty of predicting what these changes will be on a quarter-by-quarter basis. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to our future results. |
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2 |
See non-GAAP reporting reconciliations |
For more information, see the
https://churchdwight.com/pdf/Sustainability/2019-Sustainability-Report.pdf
This press release contains forward-looking statements, including, among others, statements relating to net sales and earnings growth; the impact of the COVID-19 pandemic and the Company’s response; gross margin changes; trade, marketing, and SG&A spending; 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 acquisitions (including earn-outs); and capital expenditures. Other forward-looking statements in this release may be identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to make” or other comparable terms. 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); including those relating to the outbreak of contagious diseases; other impacts of the COVID-19 pandemic and its impact on the Company’s operations, customers, suppliers, employees, and other constituents, and market volatility and impact on the economy (including causing recessionary conditions), resulting from nationwide or local or regional outbreaks or increases in infections and the risk that the Company will not be able to successfully execute its response plans with respect to the pandemic or localized outbreaks and the corresponding uncertainty; the impact of regulatory changes or policies associated with the COVID-19 pandemic, including continuing or renewed shutdowns of retail and other businesses in various jurisdictions; the impact of the CARES Act and other governmental actions; unanticipated increases in raw material and energy prices; delays or other problems in manufacturing or distribution; increases in transportation costs; adverse developments affecting the financial condition of major customers and suppliers; 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
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 and quarterly reports on Form 10Q. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the
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.
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Condensed Consolidated Statements of Income (Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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(In millions, except per share data) |
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|
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$ |
1,241.0 |
|
|
$ |
1,089.4 |
|
|
$ |
3,600.5 |
|
|
$ |
3,213.5 |
|
Cost of sales |
|
|
675.8 |
|
|
|
581.7 |
|
|
|
1,943.7 |
|
|
|
1,753.5 |
|
Gross Profit |
|
|
565.2 |
|
|
|
507.7 |
|
|
|
1,656.8 |
|
|
|
1,460.0 |
|
Marketing expenses |
|
|
170.9 |
|
|
|
125.2 |
|
|
|
389.6 |
|
|
|
352.4 |
|
Selling, general and administrative expenses |
|
|
120.5 |
|
|
|
165.7 |
|
|
|
428.1 |
|
|
|
462.6 |
|
Income from Operations |
|
|
273.8 |
|
|
|
216.8 |
|
|
|
839.1 |
|
|
|
645.0 |
|
Equity in earnings of affiliates |
|
|
1.9 |
|
|
|
2.1 |
|
|
|
5.5 |
|
|
|
5.5 |
|
Other income (expense), net |
|
|
(14.2 |
) |
|
|
(18.3 |
) |
|
|
(47.7 |
) |
|
|
(54.5 |
) |
Income before Income Taxes |
|
|
261.5 |
|
|
|
200.6 |
|
|
|
796.9 |
|
|
|
596.0 |
|
Income taxes |
|
|
45.3 |
|
|
|
43.3 |
|
|
|
161.2 |
|
|
|
124.5 |
|
Net Income |
|
$ |
216.2 |
|
|
$ |
157.3 |
|
|
$ |
635.7 |
|
|
$ |
471.5 |
|
Net Income per share - Basic |
|
$ |
0.87 |
|
|
$ |
0.64 |
|
|
$ |
2.58 |
|
|
$ |
1.91 |
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Net Income per share - Diluted |
|
$ |
0.85 |
|
|
$ |
0.62 |
|
|
$ |
2.52 |
|
|
$ |
1.87 |
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Dividends per share |
|
$ |
0.24 |
|
|
$ |
0.23 |
|
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$ |
0.72 |
|
|
$ |
0.68 |
|
Weighted average shares outstanding - Basic |
|
|
247.7 |
|
|
|
246.8 |
|
|
|
246.5 |
|
|
|
246.4 |
|
Weighted average shares outstanding - Diluted |
|
|
253.3 |
|
|
|
252.9 |
|
|
|
252.0 |
|
|
|
252.5 |
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Condensed Consolidated Balance Sheets (Unaudited) |
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(Dollars in millions) |
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Assets |
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Current Assets |
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Cash and Cash Equivalents |
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$ |
549.1 |
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$ |
155.7 |
|
Accounts Receivable |
|
|
372.8 |
|
|
|
356.4 |
|
Inventories |
|
|
497.7 |
|
|
|
417.4 |
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Other Current Assets |
|
|
24.9 |
|
|
|
26.9 |
|
Total Current Assets |
|
|
1,444.5 |
|
|
|
956.4 |
|
Property, Plant and Equipment (Net) |
|
|
579.5 |
|
|
|
573.0 |
|
|
|
|
9.4 |
|
|
|
9.7 |
|
|
|
|
2,674.1 |
|
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|
2,750.0 |
|
|
|
|
2,078.2 |
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|
2,079.5 |
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Other Long-Term Assets |
|
|
291.3 |
|
|
|
288.8 |
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Total Assets |
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$ |
7,077.0 |
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$ |
6,657.4 |
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Liabilities and Stockholders’ Equity |
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Short-Term Debt |
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$ |
1.6 |
|
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$ |
252.9 |
|
Other Current Liabilities |
|
|
970.3 |
|
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|
839.4 |
|
Total Current Liabilities |
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|
971.9 |
|
|
|
1,092.3 |
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Long-Term Debt |
|
|
1,811.9 |
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|
|
1,810.2 |
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Other Long-Term Liabilities |
|
|
1,082.9 |
|
|
|
1,087.1 |
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Stockholders’ Equity |
|
|
3,210.3 |
|
|
|
2,667.8 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
7,077.0 |
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|
$ |
6,657.4 |
|
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Condensed Consolidated Statements of Cash Flow (Unaudited) |
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Nine Months Ended |
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(Dollars in millions) |
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|
|
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Net Income |
|
$ |
635.7 |
|
|
$ |
471.5 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
138.9 |
|
|
|
129.9 |
|
Change in fair value of business acquisition liabilities |
|
|
(71.7 |
) |
|
|
9.7 |
|
Deferred income taxes |
|
|
28.0 |
|
|
|
6.1 |
|
Non-cash compensation |
|
|
18.7 |
|
|
|
17.7 |
|
Gain on sale of assets |
|
|
(3.0 |
) |
|
|
- |
|
Other |
|
|
1.7 |
|
|
|
5.0 |
|
Subtotal |
|
|
748.3 |
|
|
|
639.9 |
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(18.1 |
) |
|
|
(41.8 |
) |
Inventories |
|
|
(82.3 |
) |
|
|
(7.1 |
) |
Other current assets |
|
|
(4.1 |
) |
|
|
6.5 |
|
Accounts payable and accrued expenses |
|
|
140.1 |
|
|
|
1.8 |
|
Income taxes payable |
|
|
13.1 |
|
|
|
14.9 |
|
Other |
|
|
1.2 |
|
|
|
3.3 |
|
Net cash from operating activities |
|
|
798.2 |
|
|
|
617.5 |
|
|
|
|
|
|
|
|
|
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Capital expenditures |
|
|
(54.6 |
) |
|
|
(39.7 |
) |
Acquisitions |
|
|
- |
|
|
|
(475.0 |
) |
Proceeds from sale of assets |
|
|
7.0 |
|
|
|
- |
|
Other |
|
|
(3.6 |
) |
|
|
(4.3 |
) |
Net cash (used in) investing activities |
|
|
(51.2 |
) |
|
|
(519.0 |
) |
|
|
|
|
|
|
|
|
|
Net change in short-term debt |
|
|
(250.4 |
) |
|
|
72.4 |
|
Payment of cash dividends |
|
|
(177.7 |
) |
|
|
(168.2 |
) |
Proceeds from stock option exercises |
|
|
89.1 |
|
|
|
49.8 |
|
Purchase of treasury stock |
|
|
- |
|
|
|
(250.0 |
) |
Payment of business acquisition liabilities |
|
|
(14.5 |
) |
|
|
- |
|
Deferred financing and other |
|
|
(0.2 |
) |
|
|
(2.6 |
) |
Net cash (used in) financing activities |
|
|
(353.7 |
) |
|
|
(298.6 |
) |
|
|
|
|
|
|
|
|
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F/X impact on cash |
|
|
0.1 |
|
|
|
(1.9 |
) |
|
|
|
|
|
|
|
|
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Net change in cash and cash equivalents |
|
$ |
393.4 |
|
|
$ |
(202.0 |
) |
2020 and 2019 Product
|
Three Months Ended |
|
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Percent |
|
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Change |
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Household Products |
$ |
501.4 |
|
|
$ |
463.5 |
|
|
|
8.2 |
% |
Personal Care Products |
|
453.2 |
|
|
|
364.1 |
|
|
|
24.5 |
% |
Consumer Domestic |
$ |
954.6 |
|
|
$ |
827.6 |
|
|
|
15.3 |
% |
|
|
213.6 |
|
|
|
186.4 |
|
|
|
14.6 |
% |
Total Consumer |
$ |
1,168.2 |
|
|
$ |
1,014.0 |
|
|
|
15.2 |
% |
Specialty Products Division |
|
72.8 |
|
|
|
75.4 |
|
|
|
-3.4 |
% |
Total |
$ |
1,241.0 |
|
|
$ |
1,089.4 |
|
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
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Percent |
|
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|
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|
|
|
|
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Change |
|
|||
Household Products |
$ |
1,540.4 |
|
|
$ |
1,371.1 |
|
|
|
12.3 |
% |
Personal Care Products |
|
1,236.3 |
|
|
|
1,060.7 |
|
|
|
16.6 |
% |
Consumer Domestic |
$ |
2,776.7 |
|
|
$ |
2,431.8 |
|
|
|
14.2 |
% |
|
|
599.7 |
|
|
|
559.7 |
|
|
|
7.1 |
% |
Total Consumer |
$ |
3,376.4 |
|
|
$ |
2,991.5 |
|
|
|
12.9 |
% |
Specialty Products Division |
|
224.1 |
|
|
|
222.0 |
|
|
|
0.9 |
% |
Total |
$ |
3,600.5 |
|
|
$ |
3,213.5 |
|
|
|
12.0 |
% |
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, divestitures 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, divestitures, and foreign exchange rate changes that are out of the control of, and do not reflect the performance of the Company and management.
Adjusted Selling, General, and Administrative Expense (SG&A):
This press release also presents adjusted SG&A, namely, SG&A calculated in accordance with GAAP, as adjusted to exclude significant one-time items that are 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 SG&A expense.
Adjusted Income from Operations:
This press release also presents adjusted income from operations, namely income from operations calculated in accordance with GAAP, as adjusted to exclude a significant one-time item 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 income from operations.
Adjusted EPS:
This press release also presents adjusted earnings per share, namely, EPS calculated in accordance with GAAP, as adjusted to exclude significant one-time items that are 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 EPS growth.
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Organic Sales |
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Three Months Ended |
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Total |
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Worldwide |
|
|
Consumer |
|
|
Consumer |
|
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Specialty |
|
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|
Company |
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|
Consumer |
|
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Domestic |
|
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International |
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Products |
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||||||||||
Reported Sales Growth |
13.9 |
% |
|
|
15.2 |
% |
|
|
15.3 |
% |
|
|
14.6 |
% |
|
|
-3.4 |
% |
|
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Less: |
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Acquisitions |
4.2 |
% |
|
|
4.4 |
% |
|
|
4.6 |
% |
|
|
3.7 |
% |
|
|
0.0 |
% |
|
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Add: |
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FX / Other |
-0.2 |
% |
|
|
-0.3 |
% |
|
|
0.0 |
% |
|
|
-1.4 |
% |
|
|
0.0 |
% |
|
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Divestitures |
0.4 |
% |
|
|
0.4 |
% |
|
|
0.0 |
% |
|
|
2.1 |
% |
|
|
0.0 |
% |
|
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|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
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|
|||||
Organic Sales Growth |
9.9 |
% |
|
|
10.9 |
% |
|
|
10.7 |
% |
|
|
11.6 |
% |
|
|
-3.4 |
% |
|
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|
|
|
|
|
|
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|
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|
|
|
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|
|||||
|
Nine Months Ended |
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|||||
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Total |
|
|
Worldwide |
|
|
Consumer |
|
|
Consumer |
|
|
Specialty |
|
||||||||||
|
Company |
|
|
Consumer |
|
|
Domestic |
|
|
International |
|
|
Products |
|
||||||||||
Reported Sales Growth |
12.0 |
% |
|
|
12.9 |
% |
|
|
14.2 |
% |
|
|
7.1 |
% |
|
|
0.9 |
% |
|
|||||
Less: |
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|
|
|
|
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|
|
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|
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|
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|
|||||
Acquisitions |
3.4 |
% |
|
|
3.7 |
% |
|
|
3.7 |
% |
|
|
4.1 |
% |
|
|
0.0 |
% |
|
|||||
Add: |
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|
|
|
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|
|
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|
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|
|
|||||
FX / Other |
0.3 |
% |
|
|
0.3 |
% |
|
|
0.0 |
% |
|
|
1.6 |
% |
|
|
0.0 |
% |
|
|||||
Divestitures |
0.3 |
% |
|
|
0.3 |
% |
|
|
0.0 |
% |
|
|
1.8 |
% |
|
|
0.0 |
% |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Organic Sales Growth |
9.2 |
% |
|
|
9.8 |
% |
|
|
10.5 |
% |
|
|
6.4 |
% |
|
|
0.9 |
% |
|
|
|||||||||||
Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended
|
|
|
For the quarter ended
|
|
|
Change |
|
|||
Adjusted Diluted Earnings Per Share Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share - Reported |
$ |
0.85 |
|
|
$ |
0.62 |
|
|
|
37.1 |
% |
Flawless Earn-Out Adjustment |
$ |
(0.15 |
) |
|
$ |
0.04 |
|
|
|
- |
|
Diluted Earnings Per Share - Adjusted (non-GAAP) |
$ |
0.70 |
|
|
$ |
0.66 |
|
|
|
6.1 |
% |
|
For the three months ended
|
|
|
For the three months ended
|
|
|
Change |
|||||||||||||
|
|
|
|
|
% of NS |
|
|
|
|
|
|
% of NS |
|
|
|
|
|
|
||
Adjusted SG&A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A - Reported |
$ |
120.5 |
|
|
|
9.7 |
% |
|
$ |
165.7 |
|
|
|
15.2 |
% |
|
|
(550 |
) |
bps |
Flawless Earn-Out Adjustment |
$ |
51.0 |
|
|
|
4.1 |
% |
|
$ |
(12.0 |
) |
|
|
-1.1 |
% |
|
|
520 |
|
bps |
SG&A - Adjusted |
$ |
171.5 |
|
|
|
13.8 |
% |
|
$ |
153.7 |
|
|
|
14.1 |
% |
|
|
(30 |
) |
bps |
|
For the three months ended
|
|
|
Percentage of
|
|
||
Adjusted Income From Operations |
|
|
|
|
|
|
|
Income From Operations - Reported |
$ |
273.8 |
|
|
|
22.0 |
% |
Flawless Earn-Out Adjustment |
|
(51.0 |
) |
|
|
-4.1 |
% |
Income From Operations - Adjusted |
$ |
222.8 |
|
|
|
17.9 |
% |
Reported and Organic Forecasted Sales Reconciliation |
|
||||||
|
|
|
|
|
|
|
|
|
For the Quarter |
|
|
For the Year |
|
||
|
Ended |
|
|
Ended |
|
||
|
|
|
|
|
|
||
Reported Sales Growth |
9.0% |
|
|
11.0 |
% |
|
|
Less: Acquisition |
-1.0% |
|
|
-3.0 |
% |
|
|
Add: FX / Other |
- |
|
|
+1.0% |
|
||
|
|
|
|
|
|
|
|
Organic Sales Growth |
8.0% |
|
|
9.0 |
% |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005431/en/
Chief Financial Officer
609-806-1200
Source: