0001564590-20-020074.txt : 20200430 0001564590-20-020074.hdr.sgml : 20200430 20200430131219 ACCESSION NUMBER: 0001564590-20-020074 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 91 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200430 DATE AS OF CHANGE: 20200430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHURCH & DWIGHT CO INC /DE/ CENTRAL INDEX KEY: 0000313927 STANDARD INDUSTRIAL CLASSIFICATION: SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840] IRS NUMBER: 134996950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10585 FILM NUMBER: 20834579 BUSINESS ADDRESS: STREET 1: 500 CHARLES EWING BOULEVARD CITY: EWING STATE: NJ ZIP: 08628 BUSINESS PHONE: 609-806-1200 MAIL ADDRESS: STREET 1: 500 CHARLES EWING BOULEVARD CITY: EWING STATE: NJ ZIP: 08628 10-Q 1 chd-10q_20200331.htm 10-Q chd-10q_20200331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                      

Commission file number 1-10585

 

CHURCH & DWIGHT CO., INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-4996950

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 Charles Ewing Boulevard, Ewing, NJ 08628

(Address of principal executive offices)

Registrant’s telephone number, including area code: (609806-1200

 

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

Name of each exchange

on which registered

Common Stock, $1 par value

 

CHD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 28, 2020, there were 245,892,719 shares of Common Stock outstanding.

 

 

 

 


TABLE OF CONTENTS

PART I

 

PART II

 

1.

 

Legal Proceedings

 

27

 

 

 

 

 

1A.

 

Risk Factors

 

28

 

 

 

 

 

2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

 

 

 

 

6.

 

Exhibits

 

31

 

 

 

 

 

 

 

 

2


PART I – FINANCIAL INFORMATION

ITEM 1:

FINANCIAL STATEMENTS

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except per share data)

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2020

 

 

2019

 

Net Sales

$

1,165.2

 

 

$

1,044.7

 

Cost of sales

 

633.2

 

 

 

573.9

 

Gross Profit

 

532.0

 

 

 

470.8

 

Marketing expenses

 

96.4

 

 

 

98.1

 

Selling, general and administrative expenses

 

121.0

 

 

 

131.9

 

Income from Operations

 

314.6

 

 

 

240.8

 

Equity in earnings of affiliates

 

1.6

 

 

 

1.7

 

Investment earnings

 

0.1

 

 

 

0.5

 

Other income (expense), net

 

(0.6

)

 

 

(0.1

)

Interest expense

 

(16.3

)

 

 

(17.8

)

Income before Income Taxes

 

299.4

 

 

 

225.1

 

Income taxes

 

69.6

 

 

 

49.4

 

Net Income

$

229.8

 

 

$

175.7

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - Basic

 

245.6

 

 

 

246.1

 

Weighted average shares outstanding - Diluted

 

251.0

 

 

 

251.9

 

Net income per share - Basic

$

0.94

 

 

$

0.71

 

Net income per share - Diluted

$

0.92

 

 

$

0.70

 

Cash dividends per share

$

0.24

 

 

$

0.23

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2020

 

 

2019

 

Net Income

$

229.8

 

 

$

175.7

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

Foreign exchange translation adjustments

 

(13.0

)

 

 

1.8

 

Income (loss) from derivative agreements

 

(19.7

)

 

 

(7.7

)

Other comprehensive income (loss)

 

(32.7

)

 

 

(5.9

)

Comprehensive income

$

197.1

 

 

 

169.8

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

 

3


CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except share and per share data)

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,046.6

 

 

$

155.7

 

Accounts receivable, less allowances of $3.7 and $2.4

 

353.5

 

 

 

356.4

 

Inventories

 

395.7

 

 

 

417.4

 

Other current assets

 

33.0

 

 

 

26.9

 

Total Current Assets

 

1,828.8

 

 

 

956.4

 

 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

566.7

 

 

 

573.0

 

Equity Investment in Affiliates

 

10.0

 

 

 

9.7

 

Trade Names and Other Intangibles, Net

 

2,721.6

 

 

 

2,750.0

 

Goodwill

 

2,078.2

 

 

 

2,079.5

 

Other Assets

 

280.6

 

 

 

288.8

 

Total Assets

$

7,485.9

 

 

$

6,657.4

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Short-term borrowings

$

971.9

 

 

$

252.9

 

Accounts payable and accrued expenses

 

741.2

 

 

 

831.9

 

Income taxes payable

 

55.9

 

 

 

7.5

 

Total Current Liabilities

 

1,769.0

 

 

 

1,092.3

 

 

 

 

 

 

 

 

 

Long-term Debt

 

1,810.8

 

 

 

1,810.2

 

Deferred Income Taxes

 

580.2

 

 

 

579.6

 

Deferred and Other Long-term Liabilities

 

343.1

 

 

 

315.5

 

Business Acquisition Liabilities

 

165.0

 

 

 

192.0

 

Total Liabilities

 

4,668.1

 

 

 

3,989.6

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

Preferred Stock, $1.00 par value, Authorized 2,500,000 shares; none issued

 

0.0

 

 

 

0.0

 

Common Stock, $1.00 par value, Authorized 600,000,000 shares and 292,855,100 shares issued

      as of March 31, 2020 and December 31, 2019

 

292.8

 

 

 

292.8

 

Additional paid-in capital

 

295.7

 

 

 

295.5

 

Retained earnings

 

4,408.2

 

 

 

4,237.4

 

Accumulated other comprehensive loss

 

(99.4

)

 

 

(66.7

)

Common stock in treasury, at cost: 47,099,092 shares as of March 31, 2020 and 47,439,300 shares as of December 31, 2019

 

(2,079.5

)

 

 

(2,091.2

)

Total Stockholders' Equity

 

2,817.8

 

 

 

2,667.8

 

Total Liabilities and Stockholders' Equity

$

7,485.9

 

 

$

6,657.4

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

 

4


CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(In millions)

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2020

 

 

2019

 

Cash Flow From Operating Activities

 

 

 

 

 

 

 

Net Income

$

229.8

 

 

$

175.7

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation expense

 

16.0

 

 

 

15.8

 

Amortization expense

 

30.2

 

 

 

22.8

 

Deferred income taxes

 

8.1

 

 

 

2.8

 

Equity in net earnings of affiliates

 

(1.6

)

 

 

(1.7

)

Distributions from unconsolidated affiliates

 

1.3

 

 

 

0.7

 

Non-cash compensation expense

 

2.7

 

 

 

2.4

 

Gain on sale of assets

 

(3.0

)

 

 

0.0

 

Other

 

2.1

 

 

 

(0.7

)

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(8.3

)

 

 

(36.0

)

Inventories

 

15.2

 

 

 

(15.9

)

Other current assets

 

(5.0

)

 

 

0.5

 

Accounts payable and accrued expenses

 

(74.0

)

 

 

(59.2

)

Income taxes payable

 

54.0

 

 

 

34.3

 

Change in fair value of business acquisition liabilities

 

(27.0

)

 

 

0.0

 

Other operating assets and liabilities, net

 

(4.0

)

 

 

(3.6

)

Net Cash Provided By Operating Activities

 

236.5

 

 

 

137.9

 

Cash Flow From Investing Activities

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(16.8

)

 

 

(11.7

)

Proceeds from sale of assets

 

7.0

 

 

 

0.0

 

Other

 

(1.6

)

 

 

(0.7

)

Net Cash Used In Investing Activities

 

(11.4

)

 

 

(12.4

)

Cash Flow From Financing Activities

 

 

 

 

 

 

 

Long-term debt (repayments)

 

0.0

 

 

 

(300.0

)

Short-term debt borrowings, net of (repayments)

 

719.9

 

 

 

98.0

 

Proceeds from stock options exercised

 

9.3

 

 

 

15.1

 

Payment of cash dividends

 

(59.0

)

 

 

(55.9

)

Purchase of treasury stock

 

0.0

 

 

 

(100.0

)

Deferred financing and other

 

(0.1

)

 

 

(1.5

)

Net Cash Provided By (Used In) Financing Activities

 

670.1

 

 

 

(344.3

)

Effect of exchange rate changes on cash and cash equivalents

 

(4.3

)

 

 

0.0

 

Net Change In Cash and Cash Equivalents

 

890.9

 

 

 

(218.8

)

Cash and Cash Equivalents at Beginning of Period

 

155.7

 

 

 

316.7

 

Cash and Cash Equivalents at End of Period

$

1,046.6

 

 

$

97.9

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

 

5


CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW-CONTINUED

(Unaudited)

(In millions)

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2020

 

 

2019

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest (net of amounts capitalized)

$

21.9

 

 

$

21.8

 

Income taxes

$

7.4

 

 

$

12.3

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

Property, plant and equipment expenditures included in Accounts Payable

$

7.0

 

 

$

6.0

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

 

6


CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In millions)

 

 

Number of Shares

 

 

Amounts

 

 

Common

Stock

 

 

Treasury

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

 

 

Total

Stockholders'

Equity

 

December 31, 2018

 

292.8

 

 

 

(46.0

)

 

$

292.8

 

 

$

280.8

 

 

$

3,832.6

 

 

$

(53.6

)

 

$

(1,898.8

)

 

$

2,453.8

 

Adoption of new accounting pronouncements

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

13.0

 

 

 

0.0

 

 

 

0.0

 

 

 

13.0

 

Net income

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

175.7

 

 

 

0.0

 

 

 

0.0

 

 

 

175.7

 

Other comprehensive

   income (loss)

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

(5.9

)

 

 

0.0

 

 

 

(5.9

)

Cash dividends

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

(55.9

)

 

 

0.0

 

 

 

0.0

 

 

 

(55.9

)

Stock purchases

 

0.0

 

 

 

(1.5

)

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

(100.0

)

 

 

(100.0

)

Stock based compensation

   expense and stock option plan

   transactions

 

0.0

 

 

 

0.7

 

 

 

0.0

 

 

 

0.5

 

 

 

0.0

 

 

 

0.0

 

 

 

18.1

 

 

 

18.6

 

March 31, 2019

 

292.8

 

 

 

(46.8

)

 

$

292.8

 

 

$

281.3

 

 

$

3,965.4

 

 

$

(59.5

)

 

$

(1,980.7

)

 

$

2,499.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

292.8

 

 

 

(47.4

)

 

$

292.8

 

 

$

295.5

 

 

$

4,237.4

 

 

$

(66.7

)

 

$

(2,091.2

)

 

$

2,667.8

 

Net income

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

229.8

 

 

 

0.0

 

 

 

0.0

 

 

 

229.8

 

Other comprehensive

   income (loss)

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

(32.7

)

 

 

0.0

 

 

 

(32.7

)

Cash dividends

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

(59.0

)

 

 

0.0

 

 

 

0.0

 

 

 

(59.0

)

Stock based compensation

   expense and stock option plan

   transactions

 

0.0

 

 

 

0.3

 

 

 

0.0

 

 

 

0.2

 

 

 

0.0

 

 

 

0.0

 

 

 

11.7

 

 

 

11.9

 

March 31, 2020

 

292.8

 

 

 

(47.1

)

 

$

292.8

 

 

$

295.7

 

 

$

4,408.2

 

 

$

(99.4

)

 

$

(2,079.5

)

 

$

2,817.8

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

 

 

 

 

7


 

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In millions, except per share data)

 

1.

Basis of Presentation

These condensed consolidated financial statements have been prepared by Church & Dwight Co., Inc. (the “Company”).  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for all periods presented have been made.  Results of operations for interim periods may not be representative of results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Form 10-K”).  

The Company incurred research and development expenses in the first quarter of 2020 and 2019 of $21.7 and $20.7, respectively.  These expenses are included in selling, general and administrative (“SG&A”) expenses.

 

 

2.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

 In June 2016, the FASB issued accounting guidance (with subsequent targeted amendments) which modifies the measurements of expected credit losses for certain financial instruments and financial assets, including trade receivables.  This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  The standard did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. 

In March 2020, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.  This guidance is effective beginning on March 12, 2020, and the Company may apply the amendments prospectively to contract modifications made or relationships entered into or evaluated through December 31, 2022.  The Company is currently evaluating contracts and the optional expedients provided by the new standard.  

There have been no other accounting pronouncements issued but not yet adopted by the Company which are expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.  

     

3.

Inventories

Inventories consist of the following:

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Raw materials and supplies

$

85.0

 

 

$

85.9

 

Work in process

 

30.4

 

 

 

29.0

 

Finished goods

 

280.3

 

 

 

302.5

 

Total

$

395.7

 

 

$

417.4

 

  

 

8


 

4.

Property, Plant and Equipment, Net (“PP&E”)

PP&E consists of the following:

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Land

$

27.7

 

 

$

27.8

 

Buildings and improvements

 

256.0

 

 

 

255.4

 

Machinery and equipment

 

739.4

 

 

 

737.4

 

Software

 

98.2

 

 

 

96.7

 

Office equipment and other assets

 

78.9

 

 

 

76.0

 

Construction in progress

 

72.0

 

 

 

72.9

 

Gross PP&E

 

1,272.2

 

 

 

1,266.2

 

Less accumulated depreciation and amortization

 

705.5

 

 

 

693.2

 

Net PP&E

$

566.7

 

 

$

573.0

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

March 31,

 

 

2020

 

 

2019

 

Depreciation and amortization on PP&E

$

16.0

 

 

$

15.8

 

 

5.

Earnings Per Share (“EPS”)

Basic EPS is calculated based on income available to holders of the Company’s common stock (“Common Stock”) and the weighted average number of shares outstanding during the reported period.  Diluted EPS includes additional dilution from potential Common Stock issuable pursuant to the exercise of outstanding stock options.

The following table sets forth a reconciliation of the weighted average number of shares of Common Stock outstanding to the weighted average number of shares outstanding on a diluted basis:

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

Weighted average common shares outstanding -  basic

 

245.6

 

 

 

246.1

 

 

Dilutive effect of stock options

 

5.4

 

 

 

5.8

 

 

Weighted average common shares outstanding - diluted

 

251.0

 

 

 

251.9

 

 

Antidilutive stock options outstanding

 

1.5

 

 

 

0.1

 

 

 

6.

Stock Based Compensation Plans

The following table provides a summary of option activity:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

Average

 

 

Contractual

 

 

Aggregate

 

 

 

 

 

 

Exercise

 

 

Term

 

 

Intrinsic

 

 

Options

 

 

Price

 

 

(in Years)

 

 

Value

 

Outstanding at December 31, 2019

 

14.0

 

 

$

43.23

 

 

 

 

 

 

 

 

 

Exercised

 

(0.3

)

 

 

29.31

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2020

 

13.7

 

 

$

43.62

 

 

 

5.2

 

 

$

300.3

 

Exercisable at March 31, 2020

 

8.4

 

 

$

34.47

 

 

 

3.6

 

 

$

250.5

 

 

9


 

The following table provides information regarding the intrinsic value of stock options exercised and stock compensation expense related to stock option awards:  

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

Intrinsic Value of Stock Options Exercised

$

14.3

 

 

$

24.1

 

 

Stock Compensation Expense Related to Stock Option Awards

$

2.7

 

 

$

2.3

 

 

 

7.   Share Repurchases

On November 1, 2017, the Board authorized a share repurchase program, under which the Company may repurchase up to $500.0 in shares of Common Stock (the “2017 Share Repurchase Program”).  The 2017 Share Repurchase Program does not have an expiration.  The Company also continued its evergreen share repurchase program, authorized by the Board on January 29, 2014, under which the Company may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under the Company’s incentive plans.  

The Company did not repurchase any shares of its common stock in the first quarter of 2020.  As a result of the Company’s stock repurchases in recent years, there remains $210.0 of share repurchase availability under the 2017 Share Repurchase Program as of March 31, 2020.

 

8.Fair Value Measurements