Church & Dwight(CHD) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1: FINANCIAL STATEMENTS This section presents the company's unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, stockholders' equity, and detailed explanatory notes Condensed Consolidated Statements of Income This table summarizes the company's net sales, gross profit, operating income, net income, and earnings per share for the reported periods | Metric | Three Months Ended June 30, 2023 ($M) | Three Months Ended June 30, 2022 ($M) | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :----------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net Sales | 1,454.2 | 1,325.1 | 2,884.0 | 2,622.3 | | Gross Profit | 638.9 | 545.3 | 1,260.9 | 1,097.8 | | Income from Operations | 293.6 | 261.6 | 585.5 | 542.3 | | Net Income | 221.2 | 187.1 | 424.4 | 391.5 | | Diluted Net Income per share | 0.89 | 0.76 | 1.72 | 1.59 | | Cash dividends per share | 0.27 | 0.26 | 0.54 | 0.53 | Condensed Consolidated Statements of Comprehensive Income This table presents the company's net income and other comprehensive income components, leading to total comprehensive income for the periods | Metric | Three Months Ended June 30, 2023 ($M) | Three Months Ended June 30, 2022 ($M) | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :-------------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net Income | 221.2 | 187.1 | 424.4 | 391.5 | | Foreign exchange translation adjustments | 3.3 | (12.3) | 5.7 | (14.5) | | Income (loss) from derivative agreements | (4.9) | 18.4 | (5.7) | 33.7 | | Other comprehensive (loss) income | (1.6) | 6.1 | 1.5 | 21.1 | | Comprehensive income | 219.6 | 193.2 | 425.9 | 412.6 | Condensed Consolidated Balance Sheets This table provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates | Metric | June 30, 2023 ($M) | December 31, 2022 ($M) | | :--------------------------- | :----------------- | :--------------------- | | Cash and cash equivalents | 396.9 | 270.3 | | Total Current Assets | 1,576.4 | 1,395.9 | | Property, Plant and Equipment, Net | 802.4 | 761.1 | | Trade Names and Other Intangibles, Net | 3,369.8 | 3,431.6 | | Goodwill | 2,430.3 | 2,426.8 | | Total Assets | 8,511.0 | 8,345.6 | | Total Current Liabilities | 1,121.8 | 1,183.8 | | Long-term Debt | 2,400.9 | 2,599.5 | | Total Liabilities | 4,600.0 | 4,855.7 | | Total Stockholders' Equity | 3,911.0 | 3,489.9 | Condensed Consolidated Statements of Cash Flow This table details the company's cash flows from operating, investing, and financing activities for the reported periods | Metric | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :-------------------------------------- | :---------------------------------- | :---------------------------------- | | Net Cash Provided By Operating Activities | 509.2 | 310.4 | | Net Cash Used In Investing Activities | (69.2) | (39.8) | | Net Cash Provided By (Used In) Financing Activities | (315.4) | 132.2 | | Net Change In Cash and Cash Equivalents | 126.6 | 399.1 | | Cash and Cash Equivalents at End of Period | 396.9 | 639.7 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity components, including common stock, retained earnings, and comprehensive income | Metric | December 31, 2022 ($M) | June 30, 2023 ($M) | | :--------------------------- | :--------------------- | :----------------- | | Common Stock | 293.7 | 293.7 | | Additional Paid-In Capital | 366.2 | 422.6 | | Retained Earnings | 5,524.6 | 5,815.3 | | Accumulated Other Comprehensive Income (Loss) | (29.3) | (27.8) | | Common stock in treasury, at cost | (2,665.3) | (2,592.8) | | Total Stockholders' Equity | 3,489.9 | 3,911.0 | - Cash dividends paid for the six months ended June 30, 2023, were $133.0 million, compared to $127.4 million for the same period in 2022[37] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Basis of Presentation This note clarifies the preparation and accounting principles used for the unaudited interim financial statements - The condensed consolidated financial statements are unaudited and include only normal recurring adjustments, prepared in accordance with GAAP[40] - Interim results may not be representative of full-year results and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022[40][163] 2. New Accounting Pronouncements This note details recently adopted and future accounting pronouncements and their expected impact on the company's financials - The Company adopted new FASB guidance on supplier finance programs, effective for fiscal years beginning after December 15, 2022, requiring disclosures on program terms, balance sheet presentation, and confirmed outstanding amounts in interim periods[164] - No other accounting pronouncements issued but not yet adopted are expected to have a material impact on the Company's financial position, results of operations, or cash flows[13] 3. Inventories This table provides a breakdown of the company's inventory components, including raw materials, work in process, and finished goods | Inventory Component | June 30, 2023 ($M) | December 31, 2022 ($M) | | :----------------------- | :----------------- | :--------------------- | | Raw materials and supplies | 150.0 | 149.5 | | Work in process | 41.8 | 46.8 | | Finished goods | 483.6 | 450.3 | | Total | 675.4 | 646.6 | 4. Property, Plant and Equipment, Net ("PP&E") This note details the composition of the company's property, plant, and equipment, including depreciation expense | PP&E Component | June 30, 2023 ($M) | December 31, 2022 ($M) | | :----------------------------- | :----------------- | :--------------------- | | Land | 28.3 | 28.1 | | Buildings and improvements | 305.8 | 299.1 | | Machinery and equipment | 879.9 | 856.5 | | Software | 117.5 | 109.1 | | Office equipment and other assets | 103.3 | 96.9 | | Construction in progress | 240.7 | 211.5 | | Gross PP&E | 1,675.5 | 1,601.2 | | Less accumulated depreciation and amortization | 873.1 | 840.1 | | Net PP&E | 802.4 | 761.1 | | Metric | Three Months Ended June 30, 2023 ($M) | Three Months Ended June 30, 2022 ($M) | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :--------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Depreciation expense on PP&E | 17.7 | 16.8 | 34.6 | 33.4 | 5. Earnings Per Share ("EPS") This note explains the calculation of basic and diluted earnings per share, including the impact of stock options - Basic EPS is calculated based on income available to common stockholders and the weighted average number of shares outstanding, while diluted EPS includes additional dilution from potential common stock issuable under stock-based compensation plans[43] | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Weighted average common shares outstanding - basic | 245.0 | 242.6 | 244.4 | 242.6 | | Dilutive effect of stock options | 2.9 | 3.8 | 3.0 | 3.9 | | Weighted average common shares outstanding - diluted | 247.9 | 246.4 | 247.4 | 246.5 | | Antidilutive stock options outstanding | 2.5 | 3.0 | 3.9 | 2.9 | 6. Stock Based Compensation Plans This note describes the company's stock-based compensation plans, including RSU and PSU grants and related expenses - The Company updated its Long-Term Incentive Program (LTIP) in Q1 2023 to include initial grants of restricted stock units (RSUs) and performance share units (PSUs), with grants now occurring in the first quarter instead of the second[141] | Metric | Three Months Ended June 30, 2023 ($M) | Three Months Ended June 30, 2022 ($M) | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :-------------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Intrinsic Value of Stock Options Exercised | 97.0 | 9.5 | 107.7 | 26.3 | | Stock Compensation Expense Related to Stock Option Awards | 4.4 | 14.7 | 18.9 | 17.5 | - 117,920 RSUs with a total fair value of $10.1 million were granted in Q1 2023, vesting one-third annually over three years[45][143] - Additionally, 854,882 shares of restricted stock with a fair value of $61.5 million were issued in October 2022 related to the Hero Acquisition, also vesting over three years[45][143] - 19,650 PSUs with an aggregate fair value of $2.2 million were granted to Executive Leadership Team members in Q1 2023, with performance targets based on relative Total Shareholder Return (TSR) over a three-year period[144] 7. Share Repurchases This note details the company's share repurchase activities and remaining authorization under its programs - As of June 30, 2023, $729.7 million of share repurchase availability remains under the 2021 Share Repurchase Program[118][242][251] - During the second quarter of 2023, no shares were repurchased under publicly announced programs; however, 1,210 shares were purchased at an average price of $90.93 to satisfy tax withholding obligations related to restricted stock vesting[233][251] 8. Fair Value Measurements This note provides fair value measurements for financial instruments, categorizing them by input levels | Financial Instrument | Input Level | June 30, 2023 Carrying Amount ($M) | June 30, 2023 Fair Value ($M) | December 31, 2022 Carrying Amount ($M) | December 31, 2022 Fair Value ($M) | | :------------------------ | :---------- | :--------------------------------- | :---------------------------- | :------------------------------------- | :-------------------------------- | | Cash equivalents | Level 1 | 256.0 | 256.0 | 153.9 | 153.9 | | Short-term borrowings | Level 2 | 4.0 | 4.0 | 74.0 | 74.0 | | Term loan due Dec 22, 2024 | Level 2 | 200.0 | 200.0 | 400.0 | 400.0 | | 3.15% Senior notes due Aug 1, 2027 | Level 2 | 424.8 | 399.5 | 424.8 | 397.3 | | 2.3% Senior notes due Dec 15, 2031 | Level 2 | 399.3 | 329.0 | 399.3 | 321.3 | | 5.6% Senior notes due Nov 15, 2032 | Level 2 | 499.1 | 526.5 | 499.1 | 518.9 | | 3.95% Senior notes due Aug 1, 2047 | Level 2 | 397.7 | 333.3 | 397.6 | 316.7 | | 5.00% Senior notes due Jun 15, 2052 | Level 2 | 499.8 | 488.2 | 499.7 | 464.7 | - The carrying amounts of Accounts Receivable, Accounts Payable, and Accrued and Other Liabilities approximated estimated fair values as of June 30, 2023, and December 31, 2022[145] - There were no transfers between input levels during the six months ended June 30, 2023[170] 9. Derivative Instruments and Risk Management This note describes the company's use of derivative instruments to manage market risks, including foreign exchange and commodity prices - The Company uses derivative instruments, such as cash flow and fair value hedges, diesel and commodity hedge contracts, equity derivatives, and foreign exchange forward contracts, to manage market risks related to interest rates, foreign exchange rates, stock prices, and commodity prices, not for trading or speculative purposes[113] - The fair values and gain/loss recognized from derivative instruments did not have a material impact on the Company's condensed consolidated financial statements during the three and six months ended June 30, 2023[20] | Derivative Type | Notional Amount June 30, 2023 | Notional Amount December 31, 2022 | | :-------------------------------------------- | :---------------------------- | :-------------------------------- | | Foreign exchange contracts (hedging) | $217.8M | $231.5M | | Diesel fuel contracts (hedging) | 4.0 gallons | 5.0 gallons | | Commodities contracts (hedging) | 12.2 pounds | 26.8 pounds | | Foreign exchange contracts (non-hedging) | $1.6M | $1.6M | | Equity derivatives (non-hedging) | $20.6M | $22.5M | 10. Acquisitions This note provides details on recent acquisitions, including Hero Cosmetics and Dr. Harold Katz, LLC - On October 13, 2022, the Company acquired Hero Cosmetics, Inc. (HERO® brand acne treatment products) for $546.8 million cash (net of cash acquired) and issued $61.5 million in restricted stock, with Hero's 2022 annual net sales at approximately $179.0 million[49][173] - On December 24, 2021, the Company acquired Dr. Harold Katz, LLC and HK-IP International, Inc. (THERABREATH® brand oral care products) for $556.0 million cash (net of cash acquired) and deferred an additional $14.0 million cash payment, with TheraBreath's 2021 annual net sales at approximately $100.0 million[22][50][61] - Pro forma results for these acquisitions are not presented as their impact is not material to the Company's consolidated financial results[21][149] 11. Goodwill and Other Intangibles, Net This note details the company's goodwill and other intangible assets, including amortization and impairment considerations | Intangible Asset Type | June 30, 2023 Net ($M) | December 31, 2022 Net ($M) | | :----------------------- | :--------------------- | :------------------------- | | Amortizable intangible assets | 1,408.0 | 1,470.2 | | Indefinite-lived trade names | 1,961.8 | 1,961.4 | | Goodwill | 2,430.3 | 2,426.8 | - Intangible amortization expense was $31.1 million for Q2 2023 (vs $29.3 million in Q2 2022) and $62.2 million for 6M 2023 (vs $58.8 million in 6M 2022), with estimated annual expense of $124.0 million in 2023 and $123.0 million to $94.0 million annually over the next five years[150] - A non-cash impairment charge of $411.0 million was recorded in Q4 2022 for FINISHING TOUCH FLAWLESS intangible assets due to product discontinuance at a major retailer and declining demand[24] - The WATERPIK trade name (carrying value $644.7 million) and TROJAN trade name (carrying value $176.4 million) are susceptible to future impairment charges due to declining customer demand, increased competition, and inflationary pressures, although fair value still exceeded carrying value as of October 1, 2022[79][151] - The annual goodwill impairment test in Q2 2023 determined that the estimated fair value substantially exceeded the carrying values of all reporting units[54] 12. Leases This note outlines the company's lease arrangements, including right-of-use assets, lease liabilities, and lease costs - The Company leases manufacturing facilities, warehouses, office space, railcars, and equipment, with all recorded leases classified as operating leases and lease expense recognized on a straight-line basis[26] | Metric | June 30, 2023 ($M) | December 31, 2022 ($M) | | :-------------------------------------- | :----------------- | :--------------------- | | Right of use assets | 156.3 | 162.6 | | Total lease liabilities | 169.0 | 173.8 | | Weighted-average remaining lease term (years) | 8.5 | 8.9 | | Weighted-average discount rate | 4.5% | 4.4% | | Metric | Three Months Ended June 30, 2023 ($M) | Three Months Ended June 30, 2022 ($M) | Six Months Ended June 30, 2023 ($M) | Six Months Ended June 30, 2022 ($M) | | :---------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Lease cost | 7.9 | 7.5 | 15.6 | 15.4 | 13. Accounts Payable, Accrued and Other Liabilities This note provides a breakdown of the company's current liabilities, including trade accounts payable and accrued expenses | Liability Component | June 30, 2023 ($M) | December 31, 2022 ($M) | | :-------------------------------------- | :----------------- | :--------------------- | | Trade accounts payable | 677.7 | 666.7 | | Accrued marketing and promotion costs | 225.3 | 234.4 | | Accrued wages and related benefit costs | 78.1 | 66.8 | | Other accrued current liabilities | 129.0 | 134.9 | | Total | 1,110.1 | 1,102.8 | - As of June 30, 2023, obligations outstanding related to the Supply Chain Finance (SCF) program amounted to $83.2 million, recorded within Accounts Payable[83] 14. Short-Term Borrowings and Long-Term Debt This note details the company's short-term borrowings and long-term debt obligations, including senior notes and term loans | Debt Type | June 30, 2023 ($M) | December 31, 2022 ($M) | | :------------------------------ | :----------------- | :--------------------- | | Commercial paper issuances | 0.0 | 70.6 | | Various debt due to international banks | 4.0 | 3.4 | | Total short-term borrowings | 4.0 | 74.0 | | Term loan due December 22, 2024 | 200.0 | 400.0 | | 3.15% Senior notes due August 1, 2027 | 425.0 | 425.0 | | 2.3% Senior notes due December 15, 2031 | 400.0 | 400.0 | | 5.6% Senior notes due November 15, 2032 | 500.0 | 500.0 | | 3.95% Senior notes due August 1, 2047 | 400.0 | 400.0 | | 5.00% Senior notes due June 15, 2052 | 500.0 | 500.0 | | Debt issuance costs, net | (19.8) | (21.0) | | Net long-term debt | 2,400.9 | 2,599.5 | 15. Accumulated Other Comprehensive Income (Loss) This table presents the components of accumulated other comprehensive income (loss), including foreign currency adjustments and derivative agreements | Component | December 31, 2021 ($M) | June 30, 2022 ($M) | December 31, 2022 ($M) | June 30, 2023 ($M) | | :-------------------------------------- | :--------------------- | :----------------- | :--------------------- | :----------------- | | Foreign Currency Adjustments | (30.2) | (44.7) | (46.4) | (40.7) | | Defined Benefit Plans | (0.6) | 1.3 | 1.7 | 3.2 | | Derivative Agreements | (37.4) | (3.7) | 15.4 | 9.7 | | Accumulated Other Comprehensive (Loss) | (68.2) | (47.1) | (29.3) | (27.8) | 16. Commitments, Contingencies and Guarantees This note outlines the company's contractual commitments, potential legal contingencies, and indemnification obligations - The Company has an annual commitment to purchase 240,000 tons of sodium-based raw materials at the prevailing market price and total commitments of approximately $363.4 million as of June 30, 2023, for raw materials, packaging, and services[60][182] - Deferred cash payments related to indemnification obligations from the TheraBreath, Hero, and Zicam acquisitions amount to $14.0 million, $8.0 million, and $20.0 million, respectively[61][183][200] - The Company is subject to various pending or threatened legal actions and proceedings in the ordinary course of business, whose outcomes are uncertain and could have a material adverse impact on its financial condition[184][230] 17. Related Party Transactions This note discloses transactions with related parties, specifically Armand Products Company and ArmaKleen Company - The Company holds a 50% ownership interest in Armand Products Company and ArmaKleen Company[63][202] | Transaction Type | Six Months Ended June 30, 2023 (Armand, $M) | Six Months Ended June 30, 2022 (Armand, $M) | Six Months Ended June 30, 2023 (ArmaKleen, $M) | Six Months Ended June 30, 2022 (ArmaKleen, $M) | | :------------------------ | :---------------------------------------- | :---------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Purchases by Company | 7.6 | 6.7 | 0.0 | 0.0 | | Sales by Company | 0.0 | 0.0 | 0.6 | 0.3 | | Outstanding Accounts Receivable | 0.4 | 0.6 | 1.4 | 1.0 | | Outstanding Accounts Payable | 1.6 | 1.9 | 0.0 | 0.0 | | Administration & Management Oversight Services | 1.1 | 1.1 | 1.0 | 1.0 | 18. Segments This note provides financial information by reportable segment, including net sales and income before income taxes - The Company operates three reportable segments: Consumer Domestic (household and personal care products), Consumer International (primarily personal care products), and Specialty Products Division (SPD) (specialty chemical products), along with a Corporate segment[63][89][99][204] | Segment | Q2 2023 Net Sales ($M) | Q2 2022 Net Sales ($M) | 6M 2023 Net Sales ($M) | 6M 2022 Net Sales ($M) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Consumer Domestic | 1,128.2 | 1,004.7 | 2,245.1 | 1,999.8 | | Consumer International | 241.9 | 230.5 | 472.5 | 445.1 | | SPD | 84.1 | 89.9 | 166.4 | 177.4 | | Corporate | 0.0 | 0.0 | 0.0 | 0.0 | | Total Consolidated | 1,454.2 | 1,325.1 | 2,884.0 | 2,622.3 | | Segment | Q2 2023 Income before Income Taxes ($M) | Q2 2022 Income before Income Taxes ($M) | 6M 2023 Income before Income Taxes ($M) | 6M 2022 Income before Income Taxes ($M) | | :----------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Consumer Domestic | 230.7 | 201.7 | 459.4 | 424.4 | | Consumer International | 27.5 | 28.5 | 56.4 | 58.1 | | SPD | 9.2 | 12.4 | 16.0 | 23.9 | | Corporate | 2.0 | 3.9 | 6.4 | 6.3 | | Total Consolidated | 269.4 | 246.5 | 538.2 | 512.7 | - The Corporate segment income consists of equity in earnings of affiliates from Armand and ArmaKleen[74][203] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section discusses the company's financial performance, condition, and liquidity, highlighting the impact of economic factors, consolidated results, and segment-specific performance Recent Developments This section highlights recent economic and market trends impacting the company's costs, consumer demand, and business segments - Significant broad-based cost inflation and higher interest rates continue to affect input costs and consumer demand for discretionary brands like Waterpik and Flawless, leading consumers to shift to lower-cost alternatives[92][188] - The Company is implementing strategies including price increases, managing production schedules and inventory, increasing promotional activities, and developing lower-cost alternatives to address these demand shifts[92] - The Specialty Products business has been negatively impacted by new foreign competition in the U.S. dairy market, and the vitamin business experienced reduced shelf space due to residual impacts from previous supply chain challenges[67][205] Consolidated Results This section analyzes the company's overall financial performance, including net sales, gross margin, operating expenses, and diluted EPS | Metric | Q2 2023 Change vs. Prior Year | 6M 2023 Change vs. Prior Year | | :-------------------------------------- | :---------------------------- | :---------------------------- | | Net Sales increase | 9.7% | 10.0% | | Product volumes sold | (0.4%) | (0.2%) | | Pricing/Product mix | 5.8% | 5.8% | | Foreign exchange rate fluctuations | (0.2%) | (0.4%) | | Acquired product lines | 4.5% | 4.8% | | Metric | Q2 2023 ($M) | Q2 2022 ($M) | 6M 2023 ($M) | 6M 2022 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Gross Profit | 638.9 | 545.3 | 1,260.9 | 1,097.8 | | Gross Margin | 43.9% | 41.2% | 43.7% | 41.9% | | Marketing Expenses | 132.2 | 102.9 | 254.5 | 204.8 | | Marketing Expenses as % of Net Sales | 9.1% | 7.8% | 8.8% | 7.8% | | Selling, General & Administrative Expenses | 213.1 | 180.8 | 420.9 | 350.7 | | SG&A as % of Net Sales | 14.6% | 13.6% | 14.6% | 13.4% | | Income from Operations | 293.6 | 261.6 | 585.5 | 542.3 | | Operating Margin | 20.2% | 19.8% | 20.3% | 20.7% | | Diluted Net Income per share | 0.89 | 0.76 | 1.72 | 1.59 | - Gross margin increased by 270 basis points in Q2 2023 and 180 basis points in 6M 2023, driven by favorable price/mix/volume, productivity programs, business acquisition mix benefits, and lower transportation costs, partially offset by higher manufacturing and commodity costs[193] - The effective tax rate decreased to 17.9% in Q2 2023 (from 24.1%) and 21.1% in 6M 2023 (from 23.6%), primarily due to the tax benefit on higher stock option exercises[73][98][211] Segment Results This section provides a detailed breakdown of financial performance across the company's Consumer Domestic, Consumer International, SPD, and Corporate segments Consumer Domestic This section analyzes the performance of the Consumer Domestic segment, detailing sales drivers and income changes | Metric | Q2 2023 Change vs. Prior Year | 6M 2023 Change vs. Prior Year | | :---------------------- | :---------------------------- | :---------------------------- | | Net Sales increase | 12.3% | 12.3% | | Product volumes sold | (0.2%) | (0.6%) | | Pricing/Product mix | 6.5% | 6.5% | | Acquired product lines | 6.0% | 6.4% | - Net sales increase was driven by the HERO acquisition and higher sales of THERABREATH® mouthwash, ARM & HAMMER® Cat Litter, and ARM & HAMMER® Liquid Detergent, partially offset by declines in FINISHING TOUCH FLAWLESS® Hair Removal Products and WATERPIK® Shower Heads[102] - Income before income taxes increased by $29.0 million in Q2 2023 and $35.0 million in 6M 2023, primarily due to favorable price/mix and gross margin benefits from the HERO acquisition, partially offset by higher marketing, SG&A, interest, and manufacturing/distribution expenses[215] Consumer International This section analyzes the performance of the Consumer International segment, detailing sales growth and income changes | Metric | Q2 2023 Change vs. Prior Year | 6M 2023 Change vs. Prior Year | | :-------------------------------------- | :---------------------------- | :---------------------------- | | Net Sales increase | 4.9% | 6.2% | | Product volumes sold | 0.6% | 3.6% | | Pricing/Product mix | 5.5% | 5.3% | | Foreign exchange rate fluctuations | (1.2%) | (2.7%) | - Sales growth was driven by WATERPIK, THERABREATH, BATISTE, STERIMAR, OXICLEAN, FEMFRESH, A&H DENTAL CARE, and BAKING SODA across various regions[103] - Income before income taxes decreased by $1.0 million in Q2 2023 and $1.7 million in 6M 2023, primarily due to higher manufacturing and commodity costs, SG&A expenses, and unfavorable foreign exchange rates, partially offset by favorable price/mix and higher sales volumes[218] Specialty Products ("SPD") This section analyzes the performance of the Specialty Products Division (SPD), detailing sales and income changes | Metric | Q2 2023 Change vs. Prior Year | 6M 2023 Change vs. Prior Year | | :---------------------- | :---------------------------- | :---------------------------- | | Net Sales decrease | (6.5%) | (6.2%) | | Product volumes sold | (4.2%) | (5.8%) | | Pricing/Product mix | (2.3%) | (0.4%) | - Net sales decreased primarily due to competitive imports within the domestic dairy business[219] - Income before income taxes decreased by $3.2 million in Q2 2023 and $7.9 million in 6M 2023, mainly due to unfavorable price/product mix, higher SG&A and other expenses, and lower volumes, partially offset by favorable manufacturing costs[236] Corporate This section details the Corporate segment's income before income taxes, primarily from equity in affiliates - The Corporate segment's income before income taxes, consisting of equity in earnings of affiliates (Armand and ArmaKleen), was $2.0 million in Q2 2023 (vs $3.9 million in Q2 2022) and $6.4 million for 6M 2023 (vs $6.3 million in 6M 2022)[237] Liquidity and Capital Resources This section assesses the company's cash flow, capital structure, and ability to fund operations, investments, and shareholder returns - Net cash provided by operating activities increased by $198.8 million to $509.2 million in the first six months of 2023, driven by improved working capital and increased cash earnings, including the impact of recent acquisitions[225][226] - Net cash used in investing activities was $69.2 million (vs $39.8 million in 6M 2022), primarily for property, plant, and equipment additions, while net cash used in financing activities was $315.4 million (vs $132.2 million provided in 6M 2022), reflecting net debt payments and cash dividends, partially offset by stock option exercises[226][227][245] - The Board declared a 4% increase in the regular quarterly dividend to $0.2725 per share (annual $1.09 per share) on February 1, 2023, raising the annual payout from $255.0 million to approximately $265.0 million[224] - As of June 30, 2023, the Company had $396.9 million in cash and cash equivalents, approximately $1,495.0 million available through its $1,500.0 million unsecured revolving credit facility (maturing June 16, 2027), and $729.7 million remaining under its 2021 Share Repurchase Program[222][238][242] - The Company repaid $200.0 million of its $400.0 million Term Loan due December 22, 2024, in Q1 2023 and anticipates sufficient liquidity to fund operations, debt, dividends, capital expenditures (expected $250.0 million in 2023), and potential acquisitions[239][241] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK This section refers to the company's Form 10-K for detailed disclosures on market risk, including exposure to interest rates, foreign exchange, and commodity prices, managed via derivatives - The Company is exposed to market risk from changes in interest rates, foreign exchange rates, the price of its Common Stock, and commodity prices[113] - These risks are managed through the use of derivative instruments, such as cash flow and fair value hedges, diesel and commodity hedge contracts, equity derivatives, and foreign exchange forward contracts, not for trading or speculative purposes[113] - Further quantitative and qualitative disclosures about market risk are provided in Item 7A of Part II in the Form 10-K[228] ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Company's management, with the participation of the CEO and CFO, evaluated and concluded that the disclosure controls and procedures were effective as of the end of the reporting period, providing reasonable assurance that required information is timely recorded, processed, summarized, and reported[246] - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[247] CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION This section provides a disclaimer on forward-looking statements, highlighting risks and uncertainties that could cause actual results to differ materially, with no obligation to update - The report contains forward-looking statements regarding various aspects of the business, including net sales and earnings growth, gross margin changes, spending, cash flows, EPS, acquisitions, and market conditions[248] - These statements represent intentions, plans, expectations, and beliefs based on assumptions that may prove incorrect, and are subject to numerous risks, uncertainties, and other factors outside the Company's control[249] - Factors that could cause actual results to differ materially include market growth decline, retailer distribution, consumer demand, impacts of COVID-19, regulatory changes, the Russia/Ukraine war, inflation, supply chain disruptions, competition, and interest rates[249] - The Company undertakes no obligation to publicly update any forward-looking statements, except as required by federal securities laws[249] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other information, and exhibits ITEM 1. LEGAL PROCEEDINGS The company is routinely involved in various legal actions and proceedings, whose uncertain outcomes could materially affect its financial condition - The Company is subject to various pending or threatened legal actions, government investigations, and proceedings in the ordinary course of its business[230] - Such proceedings are subject to many uncertainties, and their outcomes, along with any related damages, may not be reasonably predictable or estimable[230] - Any adverse outcome from these legal actions could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows[230] ITEM 1A. RISK FACTORS This section refers readers to the Form 10-K for a comprehensive discussion of risk factors that could materially affect the company's business and financial condition - Readers should carefully consider the factors discussed in Item 1A, "Risk Factors" in the Form 10-K[231] - These factors could materially affect the Company's business, financial condition, or future results[231] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details Q2 2023 share repurchases, which were solely for tax withholding obligations related to restricted stock vesting, not public programs - During the second quarter of 2023, the Company did not repurchase any shares of Common Stock pursuant to its publicly announced share repurchase programs[251] - The Company purchased 1,210 shares during Q2 2023 solely to satisfy tax withholding obligations in connection with the vesting of restricted stock, at an average price of $90.93 per share[233][251] - As of June 30, 2023, $729.7 million of share repurchase availability remains under the 2021 Share Repurchase Program[251] ITEM 5. OTHER INFORMATION No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the three months ended June 30, 2023 - During the three months ended June 30, 2023, none of the Company's directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of AAG securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement"[266] ITEM 6. EXHIBITS This section lists exhibits filed with the Form 10-Q, including corporate amendments, CEO/CFO certifications, and Inline XBRL documents - Exhibits include amendments to the Company's Amended and Restated Certificate of Incorporation and By-laws[253][267][268] - Certifications of the Chief Executive Officer and Chief Financial Officer are included pursuant to Rule 13a-14(a) and 13a-14(b) under the Securities Exchange Act and 18 U.S.C. Section 1350[235][254][269][255] - Various Inline XBRL Taxonomy Extension Documents (Schema, Definition, Presentation, Calculation, Label, Instance) and the Cover Page Interactive Data File are also filed[256][257][258][270][271][272][273] SIGNATURES The report is signed by the Executive Vice President and Chief Financial Officer and Vice President and Controller on July 28, 2023, certifying its submission - The report was duly caused to be signed on behalf of CHURCH & DWIGHT CO., INC. by Richard A. Dierker, Executive Vice President and Chief Financial Officer (Principal Financial Officer), and Joseph J. Longo, Vice President and Controller (Principal Accounting Officer)[261][274][275] - The signing date for the report is July 28, 2023[261][275]