Church & Dwight Reports Third Quarter Results

EPS OF $0.47 EXCEEDS OUTLOOK

REVENUES IN-LINE WITH OUTLOOK

FULL YEAR OUTLOOK: REPORTED EPS GROWTH OF 14% AND 8% ADJUSTED

EWING, N.J.–(BUSINESS WIRE)–Church & Dwight Co., Inc. (NYSE:CHD):

2016 Third Quarter Results       2016 Full Year Outlook
  • Reported sales growth of 1.0%; Organic growth of 1.2%
  • Reported/Organic sales of approximately 3%
  • Gross Margin expansion of 60 basis points
  • Gross Margin expansion of 110 basis points
  • Marketing spend increase of 50 basis points
  • Reported EPS growth 14%; Adjusted 8%
  • Reported EPS growth of 4.4%
  • Cash from operations raised to $650MM; +7%

Church & Dwight Co., Inc. (NYSE:CHD) today announced third quarter 2016
EPS of $0.47 per share, a 4.4% increase over the prior year quarter
exceeding the Company’s outlook. Results were driven by 1.2% organic
sales growth and gross margin expansion.

Third quarter 2016 reported net sales increased $8.9 million or 1.0% to
$870.7 million driven by global Consumer net sales growth of 2.2%. The
global Consumer organic sales grew 2.5% driven by 3.0% volume growth.
The Specialty Products business declined 11.3% due to further weakness
in the dairy economy which resulted in overall organic sales growth at
the lower end of our 1 to 2% outlook. Total organic sales growth of 1.2%
was driven by volume growth of 1.7% partially offset by 0.5% from
unfavorable product mix and pricing.

Matthew T. Farrell, President and Chief Executive Officer, commented,
“We are pleased with our Consumer organic sales and the company’s
earnings growth as our business overcame continued headwinds faced by
our Specialty Products business. Our continued gross margin expansion in
the third quarter provided us flexibility with our marketing and
promotional investments to protect and grow our brand equities.”

Third Quarter Review

Consumer Domestic reported net sales were $664.8 million, an $8.4
million or 1.3% increase. Organic sales increased by 0.8% reflecting
increased couponing in the quarter, timing of promotions and a minor
product recall. Volume growth contributed 2.1% to organic sales
partially offset by a decrease of 1.3% attributable to product mix and
pricing. Brand growth was primarily driven by ARM & HAMMER and OXICLEAN
laundry detergent, BATISTE dry shampoo and OXICLEAN additives while
partially offset by a decline in FIRST RESPONSE pregnancy test kits and
XTRA laundry detergent. ARM & HAMMER unit dose laundry detergent had its
highest quarterly category consumption growth nearly doubling the
category growth for the second consecutive quarter while also increasing
share. Product sales through online retailers continues to be strong. In
particular, online vitamin and litter sales more than doubled versus
last year. Four of the ten powerbrands gained share in measured channels
in the quarter.

Consumer International reported net sales were $133.8 million, a
$9.1 million or 7.3% increase. Organic sales increased by 12.1%, driven
largely by broad based household and personal care sales in the export
business, Canada, Europe and Mexico. The BATISTE, ARM & HAMMER, TROJAN,
and OXICLEAN brands continued strong growth trajectories. Volume
increased 8.3%, while favorable product mix and pricing contributed 3.8%.

Specialty Products reported net sales were $72.1 million, a $8.6
million or 10.7% decrease. Organic sales decreased by 11.3% as low milk
prices resulted in significantly lower volumes in the animal nutrition
business. The low prices are due to an excess global supply of milk and
weak exports due to a strong U.S. dollar.

Gross margin increased 60 basis points to 45.4%. The gross margin
increase was driven by lower commodities, productivity programs, the
absence of vitamin start-up costs at the York manufacturing facility and
the impact of a higher margin acquired business partially offset by
increased trade promotional support.

Marketing expense was $98.2 million, an increase of $5.4 million
or 5.8%. Marketing expense as a percentage of net sales increased 50
basis points to 11.3%.

Selling, general, and administrative expense (SG&A) was
$101.4 million or 11.6% of net sales, a 30 basis point decline primarily
due to timing of R&D spending and lower litigation costs.

Income from Operations on a reported basis was $196.0 million or
22.5% of net sales, a 40 basis point increase.

The effective tax rate was 35.6%, compared to 35.2% last year.
The Company expects the full year effective tax rate to be approximately
35.0%.

Operating Cash Flow

For the first nine months of 2016, net cash from operating activities
was $495.0 million, an $86.2 million increase from the prior year due to
a decrease in working capital and higher cash earnings. Capital
expenditures for the first nine months were $28.1 million, a $16.6
million decrease from the prior year when the Company was completing the
York vitamin plant.

At September 30, 2016, cash on hand was $232.1 million, while total debt
was $929.7 million. The Company continues to have significant financial
flexibility for acquisitions.

2016 New Products

Mr. Farrell commented, “Innovation is the key to driving both improved
category and share growth and continues to be a big driver of our
success. We launched innovative new products in 2016 while continuing to
support prior year launches. Our 2016 new product launches are
performing well including ARM & HAMMER CLUMP & SEAL MICROGUARD clumping
cat litter, an entirely new beauty line of adult vitamins under the
VITAFUSION brand, exciting new licensing under the L’IL CRITTERS brand
driving consecutive share growth in the last two quarters, a new GROOVE
condom and new variants of the BATISTE dry shampoo which continues to
grow its #1 global share position. Our OXICLEAN liquid laundry detergent
is gaining traction behind strategic promotional support and hit our
highest share since launch.”

Share Repurchase Programs

The Board of Directors has authorized a new program under which up to
$500 million of the Company’s common stock may be repurchased in the
future to reduce the number of shares outstanding. The previously
authorized share repurchase program has been terminated. In addition,
the Company has a separate evergreen repurchase program that is intended
to neutralize dilution associated with the exercise of stock options
issued. Currently, the Company has approximately 258 million shares
outstanding.

Mr. Farrell commented, “The share repurchase program reflects the
Company’s desire for stockholders to benefit from our continued strong
growth and is an indication of our confidence in the Company’s
performance. Importantly, the Company expects to generate significant
free cash flow (cash from operating activities less capital
expenditures) over the next three years. Our robust cash flow enables us
to deliver higher value directly to our stockholders while maintaining
significant financial flexibility to continue to aggressively pursue
acquisitions.”

Outlook for 2016 and 2017

Mr. Farrell stated, “2016 has been another excellent year. 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.”

With regard to the full year, Mr. Farrell said, “Our global Consumer
business continues to perform well. We now expect reported and organic
sales growth at the lower end of our 3-4% range for the total Company
which reflects approximately 4% reported and organic sales growth for
global Consumer Products partially offset by significantly lower
Specialty Products sales. We continue to expect gross margin to expand
by approximately 110 basis points due to continued lower commodity costs
and greater distribution efficiencies. Operating margin is expected to
expand approximately 60 basis points when adjusted for the 2015 pension
settlement charge.

We are tightening our EPS growth at the lower end of our previous range
of 14-15% reported and 8-9% adjusted to 14% and 8%, respectively. This
outlook is top tier within the consumer packaged goods industry.

For the fourth quarter, we expect reported and organic sales growth of
approximately 2.5% for global Consumer Products. The Consumer organic
growth will be partially offset by continued headwinds in the Specialty
Products business resulting in a net 1-2% reported and organic sales
growth for the total Company. EPS is expected to be $0.42, a 2% increase
over the prior year quarter. The prior year quarter included a $0.01
benefit from the full year 2015 R&D tax credit.”

Mr. Farrell concluded, “Our planning process for 2017 will be finalized
over the next several months. Based on the Company’s current growth
momentum, continued focus on innovation, and confidence in gross margin
expansion, we expect to achieve high single digit EPS growth in 2017
excluding the adoption impact of an accounting change related to stock
option compensation. This represents top tier results within the
consumer packaged goods industry.”

Church & Dwight Co., Inc. will host a conference call to discuss third
quarter 2016 earnings results on November 3, 2016 at 10:00 a.m. Eastern
time. To participate, dial 877-322-9846 within the U.S. and Canada, or
631-291-4539 internationally, using access code 88396286. A replay will
be available two hours after the call at 855-859-2056 using the same
access code. 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; the impact of new accounting pronouncements; 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; the Company’s investments in joint ventures; the impact of
acquisitions; capital expenditures; the Company’s share repurchase
programs 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
acquisition of The 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.

All applicable amounts in the condensed consolidated financial
statements and related disclosure included in this press release have
been retroactively adjusted to reflect the Company’s two-for-one stock
split effected September 1, 2016.

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

    Three Months Ended   Nine Months Ended
(In millions, except per share data)  

September 30,

2016

 

September 30,

2015

 

September 30,

2016

 

September 30,

2015

Net Sales   $ 870.7   $ 861.8   $ 2,597.1   $ 2,521.2
Cost of sales     475.1     476.0     1,414.5     1,406.8
Gross Profit 395.6 385.8 1,182.6 1,114.4
Marketing expenses 98.2 92.8 310.9 297.4
Selling, general and administrative expenses     101.4     102.4     320.9     312.0
Income from Operations 196.0 190.6 550.8 505.0
Equity in earnings of affiliates 2.5 3.1 6.7 (8.4 )
Other income (expense), net     (6.1 )     (8.0 )     (21.1 )     (26.1 )
Income before Income Taxes 192.4 185.7 536.4 470.5
Income taxes     68.4     65.3     187.8     169.2
Net Income   $ 124.0   $ 120.4   $ 348.6   $ 301.3
Net Income per share – Basic $ 0.48 $ 0.46 $ 1.35 $ 1.15
Net Income per share – Diluted   $ 0.47   $ 0.45   $ 1.33   $ 1.13
Dividends per share $ 0.177 $ 0.167 $ 0.53 $ 0.51
Weighted average shares outstanding – Basic 258.0 262.2 258.0 262.6
Weighted average shares outstanding – Diluted     262.7     267.2     262.7     267.6

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions)   Sept. 30, 2016       Dec. 31, 2015
Assets            
Current Assets            
Cash and Cash Equivalents   $ 232.1   $ 330.0
Accounts Receivable 265.3 276.2
Inventories 285.7 274.0
Other Current Assets     21.4     25.8
Total Current Assets     804.5     906.0
Property, Plant and Equipment (Net) 592.7 609.6
Equity Investment in Affiliates 8.0 8.4
Trade Names and Other Intangibles 1,353.2 1,269.5
Goodwill 1,406.1 1,354.9
Other Long-Term Assets     118.2     108.5
Total Assets   $ 4,282.7   $ 4,256.9
Liabilities and Stockholders’ Equity            
Short-Term Debt $ 230.6 $ 357.2
Other Current Liabilities     555.2     515.5
Total Current Liabilities     785.8     872.7
Long-Term Debt 699.1 692.8
Other Long-Term Liabilities 677.8 668.2
Stockholders’ Equity     2,120.0     2,023.2
Total Liabilities and Stockholders’ Equity   $ 4,282.7   $ 4,256.9

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flow (Unaudited)

    Nine Months Ended
(Dollars in millions)  

September 30,

2016

   

September 30,

2015

   
Net Income $ 348.6 $ 301.3
 
Depreciation and amortization 80.2 76.3
Deferred income taxes 19.8 20.4
Non cash compensation 14.1 14.2
Asset impairment charge and other asset write-offs 0.8 17.9
Pension charge 0.0 8.4
Other 0.7 5.9
 
Changes in assets and liabilities:
Accounts receivable 13.2 (20.1 )
Inventories (6.5 ) (36.5 )
Other current assets 3.0 2.7
Accounts payable and accrued expenses 18.8 (3.1 )
Income taxes payable 33.4 41.7
Excess tax benefit on stock options exercised (29.4 ) (13.6 )
Other     (1.7 )     (6.7 )
Net cash from operating activities 495.0 408.8
 
Capital expenditures (28.1 ) (44.7 )
Acquisitions (175.5 ) (74.9 )
Other     0.8     (3.0 )
Net cash (used in) investing activities (202.8 ) (122.6 )
 
Net change in short-term debt (127.1 ) (121.7 )
Payment of cash dividends (137.4 ) (131.4 )
Stock option related 77.4 36.9
Purchase of treasury stock (200.0 ) (263.1 )
Other     (5.6 )     (1.0 )
Net cash (used in) financing activities (392.7 ) (480.3 )
 
F/X impact on cash     2.6     (18.3 )
 
Net change in cash and cash equivalents   $ (97.9 )   $ (212.4 )

2016 and 2015 Product Line Net Sales

           
Three Months Ended Percent
9/30/2016         9/30/2015     Change
Household Products $ 400.7     $ 391.2   2.4 %
Personal Care Products   264.1       265.2       -0.4 %
Consumer Domestic $ 664.8 $ 656.4 1.3 %
Consumer International   133.8       124.7       7.3 %
Total Consumer Net Sales $ 798.6 $ 781.1 2.2 %
Specialty Products Division   72.1       80.7       -10.7 %
Total Net Sales $ 870.7     $ 861.8       1.0 %
 
Nine Months Ended Percent
9/30/2016     9/30/2015     Change
Household Products $ 1,186.8 $ 1,148.6 3.3 %
Personal Care Products   795.6       760.7       4.6 %
Consumer Domestic $ 1,982.4 $ 1,909.3 3.8 %
Consumer International   397.6       376.0       5.7 %
Total Consumer Net Sales $ 2,380.0 $ 2,285.3 4.1 %
Specialty Products Division   217.1       235.9       -8.0 %
Total Net Sales $ 2,597.1     $ 2,521.2       3.0 %

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 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 earnings per share growth.

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.

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.

CHURCH & DWIGHT CO., INC.

Organic Sales

   
Three Months Ended 9/30/2016
                         
Total Worldwide Consumer Consumer Specialty
Company Consumer Domestic International Products
Reported Sales Growth 1.0% 2.2% 1.3% 7.3% -10.7%
Less:
Acquisitions 0.8% 0.9% 0.8% 1.6% 0.0%
Add:
FX / Other   1.0%   1.2%   0.3%   6.4%   -0.6%
 
Organic Sales Growth   1.2%   2.5%   0.8%   12.1%   -11.3%
 
Nine Months Ended 9/30/2016
 
Total Worldwide Consumer Consumer Specialty
Company Consumer Domestic International Products
Reported Sales Growth 3.0% 4.1% 3.8% 5.7% -8.0%
Less:
Acquisitions 0.8% 1.0% 0.8% 1.6% 0.0%
Add:
FX / Other   1.2%   1.3%   0.1%   6.6%   0.9%
 
Organic Sales Growth   3.4%   4.4%   3.1%   10.7%   -7.1%

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

   
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) $ 1.75 EPS Reported (GAAP) $ 1.54 14%
 
2015 Pension Plan Charge $ 2015 Pension Plan Charge $ 0.02
 
2015 Natronx Impairment Charge $ 2015 Natronx Impairment Charge $ 0.06  
 
Forecasted EPS Reported Basis (GAAP) $ 1.75 Adjusted EPS ( Non-GAAP) $ 1.62 8%

Contacts

Church & Dwight Co., Inc.
Rick Dierker, 609-806-1900
Chief
Financial Officer