Church & Dwight(CHD) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, including income, balance sheet, and cash flow statements with detailed notes Condensed Consolidated Statements of Income Net sales decreased to $1,467.1 million and net income to $220.1 million in Q1 2025 compared to Q1 2024 Q1 2025 vs Q1 2024 Income Statement Highlights (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,467.1 | $1,503.3 | -2.4% | | Gross Profit | $659.6 | $687.0 | -4.0% | | Income from Operations | $295.3 | $305.0 | -3.2% | | Net Income | $220.1 | $227.7 | -3.3% | | Diluted EPS | $0.89 | $0.93 | -4.3% | | Cash dividends per share | $0.29 | $0.28 | +3.6% | Condensed Consolidated Balance Sheets Total assets increased slightly to $8,955.9 million, while total liabilities decreased and stockholders' equity rose as of March 31, 2025 Balance Sheet Summary (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,358.8 | $2,240.6 | | Total Assets | $8,955.9 | $8,883.1 | | Total Current Liabilities | $1,208.0 | $1,315.9 | | Long-term Debt | $2,205.2 | $2,204.6 | | Total Liabilities | $4,404.9 | $4,522.3 | | Total Stockholders' Equity | $4,551.0 | $4,360.8 | Condensed Consolidated Statements of Cash Flow Net cash from operating activities decreased to $185.7 million in Q1 2025, with overall cash and equivalents increasing to $1,074.5 million Cash Flow Summary (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $185.7 | $263.0 | | Net Cash Used In Investing Activities | $(16.7) | $(46.8) | | Net Cash Used In Financing Activities | $(61.0) | $(209.1) | | Net Change In Cash and Cash Equivalents | $110.4 | $5.2 | | Cash and Cash Equivalents at End of Period | $1,074.5 | $349.7 | Notes to Condensed Consolidated Financial Statements Notes detail the Graphico acquisition, a significant VMS business impairment, and planned divestitures of underperforming brands - On June 3, 2024, the Company acquired Graphico, Inc., a Japan-based distributor, for $19.9 million net of cash acquired, expanding business in the APAC region[45] - In Q3 2024, the company recorded a total impairment charge of $357.1 million related to its VMS business, including a $281.3 million impairment of the trade name, due to declining market share and profitability[52][55] - The WATERPIK® business, with a trade name carrying value of $644.7 million, is noted as being susceptible to future impairment due to declining customer demand and sales[56] - On May 1, 2025, the company announced strategic actions to shut down or sell the Flawless, Spinbrush, and Waterpik showerhead businesses, expecting an estimated charge of $60.0 million to $80.0 million in Q2 2025, primarily from non-cash impairments[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, highlighting sales decline, margin contraction, and strategic actions to address challenges Overview and Recent Developments The company addresses supply chain issues, tariff exposure, and announces plans to exit certain underperforming business lines - The company is experiencing supply chain challenges and economic uncertainty due to U.S. trade policies and tariffs, with a projected 12-month gross tariff exposure of approximately $190.0 million[86] - Management expects to reduce tariff exposure by approximately 80% through strategic actions, including ceasing the import of Waterpik flossers from China to the U.S[86] - On May 1, 2025, the company announced it will shut down or sell the Flawless, Spinbrush, and Waterpik showerhead businesses, which collectively generate about $150.0 million in annual net sales[87] Results of Operations Consolidated net sales decreased 2.4% due to volume declines, and gross margin contracted by 70 basis points in Q1 2025 Q1 2025 Consolidated Results vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,467.1M | $1,503.3M | -2.4% | | Gross Margin | 45.0% | 45.7% | -70 bps | | Operating Margin | 20.2% | 20.3% | -10 bps | | Diluted EPS | $0.89 | $0.93 | -4.3% | - The 2.4% net sales decrease was driven by a 1.4% decline in product volumes sold, a 0.7% negative impact from foreign exchange, and a 0.5% impact from exiting product lines[91] - Gross margin decreased by 70 bps due to higher manufacturing costs (+230 bps), partially offset by productivity programs (-160 bps) and favorable price/mix/volume (-10 bps)[93] Segment Results Consumer Domestic sales declined, Consumer International grew, and Specialty Products sales decreased due to business exits in Q1 2025 Net Sales by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Consumer Domestic | $1,129.8 | $1,165.2 | -3.0% | | Consumer International | $261.9 | $255.0 | +2.7% | | SPD | $75.4 | $83.1 | -9.3% | - Consumer Domestic sales decline was driven by VITAFUSION®/L'IL CRITTERS®, OXICLEAN®, and ARM & HAMMER® cat litter, partially offset by growth in THERABREATH® and ZICAM®[100] - Consumer International sales growth was driven by a 5.9% increase in volume, partially offset by a 4.4% negative impact from foreign exchange[102] - SPD net sales decrease was primarily due to a 13.6% impact from exiting the MEGALAC business[104] Liquidity and Capital Resources The company maintains strong liquidity with significant cash and credit facility availability, and increased its quarterly dividend - As of March 31, 2025, the company had $1,074.5 million in cash and cash equivalents and approximately $1,494.0 million available under its revolving credit facility[110] - The Board declared a 4% increase in the quarterly dividend to $0.295 per share, effective January 29, 2025[113] - There is $658.9 million of share repurchase availability under the 2021 Share Repurchase Program as of March 31, 2025[113] Cash Flow Analysis Operating cash flow decreased in Q1 2025 due to working capital changes, while the cash conversion cycle remained stable - Net cash provided by operating activities decreased to $185.7 million in Q1 2025 from $263.0 million in Q1 2024, due to increased working capital and lower cash earnings[115] Cash Conversion Cycle (Days) | Metric | March 31, 2025 | March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | DSO | 37 | 32 | +5 | | DIO | 70 | 67 | +3 | | DPO | 79 | 71 | +8 | | Cash Conversion Cycle | 28 | 28 | 0 | Quantitative and Qualitative Disclosures about Market Risk This section refers to the company's Annual Report on Form 10-K for detailed disclosures on market risk - For disclosures about market risk, the report refers to Item 7A in the company's Form 10-K[119] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective as of the end of the quarter[120] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[121] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other general information for the reporting period Legal Proceedings The company is subject to various legal actions in the ordinary course of business, with uncertain outcomes that could be material - The Company is subject to various legal proceedings in the ordinary course of business, the outcomes of which are uncertain and could have a material adverse effect[126] Risk Factors This section refers to the detailed discussion of risk factors in the company's Annual Report on Form 10-K - The report refers to Item 1A, "Risk Factors" in the Form 10-K for a discussion of factors that could materially affect the company[127] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares in Q1 2025, with $658.9 million remaining under the 2021 Share Repurchase Program - The company did not repurchase any shares of Common Stock under its share repurchase programs during Q1 2025[129] - As of March 31, 2025, there is $658.9 million of share repurchase availability under the 2021 Share Repurchase Program[130] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[132] Exhibits This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents and certifications - The report includes an index of exhibits, such as certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[135]