Church & Dwight(US:CHD)2024-11-01 19:49Financial Performance - Net loss for Q3 2024 was $75.1 million, compared to a net income of $177.5 million in Q3 2023[6] - Comprehensive loss for Q3 2024 was $64.2 million, compared to a comprehensive income of $175.9 million in Q3 2023[6] - Net income for Q3 2024 was $177.5 million, compared to $203.2 million in Q1 2023 and $221.2 million in Q2 2023[12][13] - Net income for the nine months ended September 30, 2024, was $396.1 million, down from $601.9 million in the prior year period[10] - Net sales for the three months ended September 30, 2024 increased by 3.8% to $1,510.6 million compared to $1,455.9 million in the same period in 2023[84] - Gross profit for the three months ended September 30, 2024 increased by 5.7% to $683.1 million, with gross margin improving by 80 basis points to 45.2%[84] - Net sales for the nine months ended September 30, 2024 were $4,525.1 million, a 4.3% increase compared to $4,339.9 million in the same period in 2023[85] - Gross profit for the nine months ended September 30, 2024 was $2,082.2 million, a 9.2% increase compared to $1,907.2 million in the same period in 2023[85] - Marketing expenses for the three months ended September 30, 2024 increased by 10.7% to $185.8 million, representing 12.3% of net sales, up 80 basis points from the same period in 2023[89] - SG&A expenses for the three months ended September 30, 2024 were $231.7 million, a 4.0% increase compared to $222.7 million in the same period in 2023[84] - The effective tax rate for the three months ended September 30, 2024 was a benefit of 25.9%, impacted by the non-cash VMS impairment charge[93] - Interest income for the three months ended September 30, 2024 increased by $6.1 million to $10.6 million, primarily due to the favorable Waterpik tariff ruling and higher interest rates[92] Cash Flow and Liquidity - Cash and cash equivalents increased to $752.1 million as of September 30, 2024, up from $344.5 million at the end of 2023[8] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $863.9 million, up from $795.1 million in the same period of 2023[10] - Net change in cash and cash equivalents was $407.6 million for the nine months ended September 30, 2024, up from $303.0 million in the same period of 2023[10] - Cash equivalents increased to $571.9 million as of September 30, 2024, compared to $217.7 million as of December 31, 2023[37] - Net cash provided by operating activities increased by $68.8 to $863.9 in the first nine months of 2024, compared to $795.1 in the same period in 2023, primarily due to higher cash earnings[118] - Net cash used in investing activities was $138.1 in the first nine months of 2024, primarily for property, plant, and equipment additions ($125.2) and the Graphico Acquisition ($19.9)[119] - Net cash used in financing activities was $318.3 in the first nine months of 2024, reflecting $200.4 in net debt payments and $207.4 in cash dividend payments, partially offset by $90.3 from stock option exercises[119] - The company anticipates capital expenditure program costs of approximately $180.0 in 2024, primarily for manufacturing capacity investments in laundry and litter to support future sales growth[117] - The company repaid the remaining $200.0 of its Term Loan due December 22, 2024, with cash on hand in Q1 2024[114] Assets and Liabilities - Total current assets rose to $2,016.7 million as of September 30, 2024, compared to $1,529.7 million at the end of 2023[8] - Accounts receivable increased to $555.3 million, up from $526.9 million at the end of 2023, indicating higher sales activity[8] - Inventories grew to $658.5 million, up from $613.3 million at the end of 2023, reflecting increased production or slower sales turnover[8] - Total liabilities decreased to $4,472.5 million, down from $4,713.8 million at the end of 2023, primarily due to reductions in current liabilities[8] - Long-term debt as of September 30, 2024, is $2,208.2 million, compared to $2,202.2 million at December 31, 2023[62] - The company's short-term borrowings as of September 30, 2024, decreased to $3.4 million from $3.9 million at December 31, 2023[62] - Accounts payable as of September 30, 2024, increased to $705.9 million from $630.6 million at December 31, 2023[60] - The company's lease liabilities as of September 30, 2024, total $201.3 million, with current lease liabilities at $30.4 million and long-term lease liabilities at $170.9 million[58] - Lease costs for the nine months ended September 30, 2024, amounted to $29.8 million, compared to $23.5 million for the same period in 2023[58] - The company's minimum annual rentals under lease agreements, including reasonably assured renewal options, total $241.2 million, with the present value of lease liabilities at $201.3 million[59] Impairments and Amortization - Tradename and other asset impairments were $357.1 million for the nine months ended September 30, 2024, compared to $0.0 million in the same period of 2023[10] - The company recorded a $281.3 million impairment charge for the VITAFUSION and L'IL CRITTERS trade names due to declining market share and profitability[50][51] - The company recorded a $75.8 million pre-tax impairment charge for long-lived assets supporting the VMS business, including $60.0 million for PP&E and $15.8 million for customer relationship intangible assets[52] - The total VMS impairment charges for the third quarter of 2024 amounted to $357.1 million, including trade name, customer relationship intangible asset, and PP&E impairments[54] - Intangible amortization expense for the third quarter of 2024 was $30.7 million, with an estimated annual expense of $117.0 million for 2024[47] - Intangible amortization expense for the first nine months of 2024 was $92.2 million, with an estimated annual expense of $117.0 million for 2024[47] Acquisitions and Divestitures - The company acquired Graphico, Inc. for $19.9 million, with annual net sales of $38.0 million in 2023, aiming to expand in the Asia-Pacific region[41] - The fair value of Graphico's net assets at acquisition includes $8.4 million for customer relationship intangible assets and $2.8 million for goodwill[42] - The company acquired Hero Cosmetics, Inc. for $546.8 million, with annual net sales of $179.0 million in 2022, managed in the Consumer Domestic segment[43] - The fair value of Hero's net assets at acquisition includes $400.0 million for the trade name and $156.1 million for goodwill[44] - The company sold its Passport food safety business in the second quarter of 2024 for cash proceeds of $6.6 million, resulting in a gain of $0.1 million[81] - The company exited the MEGALAC supplement portion of its Animal Nutrition business in the first quarter of 2024, with net sales for the nine months ended September 30, 2024 being $7.6 million compared to $29.7 million in the same period in 2023[80] Segment Performance - The company's Consumer Domestic segment generated $1,170.8 million in net sales for Q3 2024, compared to $1,133.1 million in Q3 2023[76] - The company's Consumer International segment generated $267.7 million in net sales for Q3 2024, compared to $244.4 million in Q3 2023[76] - The company's Specialty Products Division (SPD) generated $72.1 million in net sales for Q3 2024, compared to $78.4 million in Q3 2023[76] - The company's total consolidated net sales were $1,510.6 million for Q3 2024, compared to $1,455.9 million in Q3 2023[77] - Consumer Domestic net sales increased by 3.3% to $1,170.8 million in Q3 2024 compared to Q3 2023, driven by growth in HERO® acne treatment products and ARM & HAMMER® baking soda[101] - Consumer International net sales grew by 9.5% to $267.7 million in Q3 2024, driven by OXICLEAN® stain removers and THERABREATH® mouth wash[103] - SPD net sales decreased by 8.0% to $72.1 million in Q3 2024 due to the exit of product lines, including the MEGALAC supplement and Passport food safety business[108] - Consumer Domestic loss before income taxes was $(107.1) million in Q3 2024, impacted by a $327.4 million non-cash impairment charge[102] - Consumer International loss before income taxes was $(4.7) million in Q3 2024, impacted by a $29.7 million non-cash impairment charge[107] - SPD income before income taxes increased by $1.2 to $7.4 in Q3 2024, driven by favorable price/mix ($2.6), lower manufacturing costs ($1.0), and reduced SG&A and marketing costs ($0.5 and $0.1 respectively), partially offset by lower sales volumes ($3.0) due to product line exits[110] Stockholders' Equity and Share Repurchases - Total stockholders' equity grew to $4,193.7 million as of September 30, 2024, up from $3,489.9 million at the end of 2022[12][13] - Retained earnings reached $6,200.9 million as of September 30, 2024, up from $5,524.6 million at the end of 2022[12][13] - Additional paid-in capital increased to $534.7 million as of September 30, 2024, from $366.2 million at the end of 2022[12][13] - Treasury stock decreased to $(2,817.4) million as of September 30, 2024, from $(2,665.3) million at the end of 2022[12][13] - As of September 30, 2024, there remains $658.9 million of share repurchase availability under the 2021 Share Repurchase Program[35] - The company declared a 4% increase in the regular quarterly dividend to $0.28375 per share, raising the annual dividend payout from $267.0 to approximately $276.0[114] Research and Development - Research and development expenses increased to $36.0 million in Q3 2024 from $30.3 million in Q3 2023[16] Stock-Based Compensation - Stock-based compensation expense and stock option plan transactions totaled $30.5 million in Q3 2024[12] - Stock compensation expense related to stock option awards increased to $24.8 million for the nine months ended September 30, 2024, up from $22.7 million in the same period in 2023[28] - The company granted 105,600 RSUs with a total fair value of $10.8 million during the nine months ended September 30, 2024, compared to 119,570 RSUs with a total fair value of $10.3 million in the same period in 2023[30] - Restricted stock expense associated with the Hero Acquisition decreased to $17.2 million for the nine months ended September 30, 2024, down from $21.9 million in the same period in 2023[31] - The company granted 19,960 PSUs to members of the Executive Leadership Team in the first quarter of 2024, valued at a weighted average grant date fair value of $122.24 per PSU[32] Debt and Financing - Long-term debt repayments amounted to $200.6 million for the nine months ended September 30, 2024, consistent with $200.0 million in the same period of 2023[10] - The fair value of 3.15% Senior notes due August 1, 2027 decreased to $415.1 million as of September 30, 2024, compared to $406.9 million as of December 31, 2023[37] - The notional amount of foreign exchange contracts designated as hedging instruments decreased from $228.9 million on December 31, 2023, to $219.7 million on September 30, 2024[40] Commitments and Guarantees - The company has an annual commitment to purchase 240,000 tons of sodium-based raw materials at the prevailing market price under a partnership agreement[65] - The company had commitments of approximately $408.6 million as of September 30, 2024, including raw materials, packaging supplies, and services[66] - The company had guarantees and letters of credit totaling $6.0 million as of September 30, 2024[66] - The company deferred an additional cash payment of $20.0 million related to the Zicam Acquisition, payable five years from the closing if not used for indemnity obligations[67] - The company deferred an additional cash payment of $14.0 million related to the TheraBreath Acquisition, with installments of $2.0 million paid in January 2024, $7.0 million to be paid in December 2024, and $5.0 million in December 2025[68] - The company deferred an additional cash payment of $8.0 million related to the Hero Acquisition, payable five years from the closing if not used for indemnity obligations[69] Other Financial Metrics - The company's seven "power brands" represent approximately 70% of its net sales and profits[79] - The company received a favorable tariff ruling from the U.S. government, resulting in $37.6 million in cash refunds (pre-tax) for the nine months ended September 30, 2024[81] - The company's equity in earnings from affiliates Armand and ArmaKleen totaled $3.0 million in Q3 2024, down from $1.7 million in Q3 2023[96] - The Graphico acquisition contributed 1.9% to Consumer International net sales growth in Q3 2024[103] - Excluding divestitures, SPD net sales increased in Q3 2024 due to growth in animal nutrition and specialty chemicals segments[109] - Corporate segment income before income taxes rose to $3.0 in Q3 2024 from $1.7 in Q3 2023, while the nine-month income decreased to $7.2 in 2024 from $8.1 in 2023, following the sale of a 50% interest in Armakleen[111] - The cash conversion cycle increased by 2 days to 29 days in Q3 2024, driven by a 6-day increase in DSO and a 5-day decrease in DIO[119]