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Church & Dwight Reports Fourth Quarter and Full Year 2022 Results<\/b><\/p>\n
\n2022 Fourth Quarter Results\n<\/p>\n
\n2022 Full Year Results\n<\/p>\n
EWING, N.J.–(BUSINESS WIRE<\/a>)– \nFull year Reported EPS was $1.68, a decline of 49.4% compared to 2021 reported EPS, including a $411 million impairment charge of Flawless intangible assets as a major retailer discontinued select products. The decline in discretionary consumption and higher interest rates are also expected to impact the future cash flow generation for that business. The Company continues to believe in the long-term growth opportunities for the Flawless brand.\n<\/p>\n \nFull year 2022 Adjusted EPS was $2.97, a decline of 1.7% compared to 2021 adjusted EPS.1<\/sup> A higher tax rate reduced full year Adjusted EPS by $0.11 while currency was a $0.02 drag.Full year Adjusted EPS was at the high end of the Company\u2019s outlook of $2.93-$2.97, driven by higher sales.\n<\/p>\n \nQ4 net sales were $1,436.0 million, a $67.3 million or 4.9% increase, including a 1% drag from currency. This exceeded the Company\u2019s outlook of 2% growth. Organic sales increased 0.4%1<\/sup>, exceeding the Company\u2019s outlook of down 1%, driven by 4.2% positive price and product mix offset by 3.8% lower volume.\n<\/p>\n \nOur U.S. portfolio grew consumption in 13 of 17 categories in Q4. The trade down to value laundry detergent continued as ARM & HAMMER\u00ae<\/sup> liquid detergent achieved an all-time high market share again in Q4. ARM & HAMMER liquid detergent, ARM & HAMMER Unit Dose and ARM & HAMMER Scent Boosters all grew volume high single digits in the quarter. ARM & HAMMER clumping litter and BATISTE\u00ae<\/sup> dry shampoo achieved all-time market share highs. Our recent acquisitions, ZICAM\u00ae<\/sup>, THERABREATH\u00ae <\/sup>and HERO\u00ae<\/sup> all experienced double-digit consumption growth and market share gains in the quarter. In Q4, discretionary brands (WATERPIK\u00ae<\/sup> and FLAWLESS) and the vitamin business, which account for approximately 20% of sales, continued to experience lower consumption resulting in a 4% headwind to organic sales in the quarter. In second half 2023, we continue to expect a return to modest growth in the aggregate for these categories.\n<\/p>\n \nReported EPS for Q4 was a loss of $0.67, which included the impact of the intangible asset impairment.1<\/sup> Adjusted EPS in Q4 was $0.621<\/sup> per share compared to $0.64 EPS in Q4 2021. Adjusted EPS was at the high end of our $0.58 to $0.62 EPS outlook primarily as a result of higher-than-expected revenues from our consumer domestic business. Adjusted EPS of $0.62 includes a drag of $0.12 from a higher tax rate compared to Q4 2021.\n<\/p>\n \nMatthew Farrell, Chief Executive Officer, commented, \u201cI would like to recognize all Church & Dwight employees around the world for their dedication to helping us navigate another challenging year. Our people have managed through a volatile environment and have made significant improvements in our supply chain resiliency.\n<\/p>\n \n\u201cThe Domestic business gained market share in 7 of our 14 power brands and expects to accelerate market share gains in 2023 as we materially increase our marketing spending as a percent of sales. Global online sales as a percentage of total sales expanded to 16% for the full year (15% in 2021).\n<\/p>\n \n\u201cThe International subsidiaries had a strong quarter offset by the Global Markets Group which had a challenging quarter due to supply constraints. In our Specialty Products business we experienced lower volumes in the animal and food production segment.\n<\/p>\n \n\u201cSignificant inflation of material, component and manufacturing costs impacted our gross margin resulting in contraction of 50 bps.\n<\/p>\n \n\u201cWith continued strong consumer demand for our products, we made significant capital investments in 2022 and will continue to expand capacity in our laundry and litter businesses in 2023 in order to support these fast-growing businesses.\u201d\n<\/p>\n Fourth Quarter Review<\/span><\/b><\/p>\n Consumer Domestic<\/b> net sales were $1,120.8 million, a $79.1 million or 7.6% increase versus prior year driven by the HERO acquisition. The growth across many household and personal care brands offset headwinds from our discretionary businesses. Organic sales increased 0.4%\u00b9 due to positive price and product mix (+4.1%), offset by lower volume (-3.7%) largely in our discretionary businesses. Growth was led by ARM & HAMMER liquid detergent, ARM & HAMMER clumping cat litter, ZICAM supplements, and BATISTE dry shampoo.\n<\/p>\n Consumer International<\/b> net sales were $231.3 million, a $10.7 million or a 4.4% decrease, primarily driven by a negative drag from currency. Organic sales increased 1.3%\u00b9 due to positive price and product mix (+5.1%), offset by volume (-3.8%).\n<\/p>\n Specialty Products <\/b>net sales were $83.9 million, a $1.1 million or a 1.3% decrease. Organic sales decreased 1.3%\u00b9 primarily due to lower volume (-5.4%) offset by higher price (+4.1%).\n<\/p>\n Gross margin<\/b> decreased 50 basis points to 42.0% due to the impact of higher manufacturing costs, net of pricing and productivity.\n<\/p>\n Marketing expense<\/b> was $189.7 million, down $11.4 million vs prior year. Marketing expense as a percentage of net sales decreased 150 basis points to 13.2%. Our higher fill rates enabled the Company to spend more in Q4 than any other quarter in 2022 and we expect to maintain strong marketing support in 2023.\n<\/p>\n Selling, general, and administrative expense (SG&A) <\/b>was $611.2 million, including intangible asset impairment charges of $411 million related to the Flawless business. Adjusted SG&A was $194.21 <\/sup>million or 13.5% of net sales, a 140 basis points decrease, primarily due to lower incentive compensation.\n<\/p>\n Income from Operations<\/b> was a loss of $198.4 million, including the Flawless impairment. Adjusted Income from Operations was $218.61 <\/sup>million or 15.3% of net sales.\n<\/p>\n Other Expense <\/b>was $25.5 million, a $13.2 million increase due to higher interest expense resulting from debt issued for the Hero acquisition and higher interest rates on variable debt. Higher interest rates are expected to impact interest expense comparisons throughout 2023.\n<\/p>\n The effective tax rate<\/b> increased to 26.4% compared to 3.7% in 2021. The 2021 Q4 tax rate was unusually low primarily due to a higher level of stock option exercises. The 2022 full year rate was 20.9% compared to the 2021 full year rate of 19.8%.\n<\/p>\n Operating Cash Flow<\/span><\/b><\/p>\n \nFor the full year 2022, cash from operating activities was $885.2 million, a decrease of $108.6 million due to lower cash earnings and higher working capital. Capital expenditures for the full year were $178.8 million, a $60.0 million increase from the prior year due to manufacturing capacity investments. The $885.2 million exceeded our outlook of $800.0 million primarily due to higher cash earnings and lower than expected inventory levels.\n<\/p>\n \nAt December 31, 2022, cash on hand was $270.3 million, while total debt was $2.7 billion.\n<\/p>\n 4% Dividend Increase<\/span><\/b><\/p>\n \nThe Company\u2019s Board of Directors declared a 4% increase in the quarterly dividend from $0.2625 to $0.2725 per share, equivalent to an annual dividend of $1.09 per share. This raises the annual dividend payout from $255 million to approximately $265 million. The quarterly dividend will be payable March 1st, 2023, to stockholders of record at the close of business on February 15th, 2023. This is the 27th consecutive year in which the Company has increased the dividend. The Company has paid a consecutive quarterly dividend for 122 years.\n<\/p>\n \nMr. Farrell commented, \u201cOur dividend increase, and dividend history reflect the Company\u2019s desire for stockholders to benefit from our strong cash generation and reflects our confidence in continuing our strong performance. 2023 should be another year of strong cash flow. Our robust cash flow enables us to return cash to our stockholders while maintaining significant financial flexibility to invest in our business to drive organic growth and aggressively pursue acquisitions.\u201d\n<\/p>\n 2023 New Products<\/span><\/b><\/p>\n \nMr. Farrell commented, \u201cProduct innovation continues to be a big driver of our success and we are equally excited about our new product launches in 2023.\n<\/p>\n \nARM & HAMMER Litter achieved record share in 2022. To maintain the momentum, we are launching ARM & HAMMER Hardball\u2122<\/sup>, a transformational plant-based substrate that is lightweight and creates virtually indestructible clumps for no-mess scooping. Over time we expect this new litter will enable the Company to capture a greater share of the lightweight litter category.\n<\/p>\n \nTROJAN\u00ae<\/sup> is building on the success of the Raw\u2122<\/sup> franchise by offering the new TROJAN Raw Non-Latex condom which will be America\u2019s Thinnest Condom. This innovation platform has been a driving force to improving TROJAN share.\n<\/p>\n \nThe THERABREATH brand, the fastest-growing brand in the mouthwash category, is expanding into the kids segment with the launch of 3 new fluoride mouthwashes. These products are dentist-formulated, free of dyes, and have certified organic flavor.\n<\/p>\n \nNAIR\u00ae<\/sup> is launching Prep & Smooth a one-step solution that preps the face for makeup application in a No-Touch, No-Mess format.\n<\/p>\n \nHERO continues to innovate in the acne treatment category. Building on the success of its MIGHTY PATCH\u00ae <\/sup>products, HERO is launching MICROPOINT FOR BLEMISHES\u00ae<\/sup>XL patches. The HERO Rescue line will also be expanding with the launch of Rescue Retinol Nighttime Renewing Cream. These new products help to provide gentle and effective solutions for issue-prone skin.\n<\/p>\n \nBATISTE, a leader driving growth in the dry shampoo category, is launching Overnight and Texturizing dry shampoos. Both products are designed to tap into new usage occasions.\n<\/p>\n Outlook for 2023<\/span><\/b><\/p>\n \nMr. Farrell stated, \u201cWe exited 2022 with consumption growth across many of our categories. Although uncertainty remains regarding inflation, commodities, interest rates, currency movements, China, and consumer confidence, we are cautiously optimistic about 2023 and remain focused on offering high quality products to consumers at the right value.\n<\/p>\n \n\u201cOver the long term, we remain committed to delivering on our Evergreen model which is 3% organic net sales growth, gross margin expansion and 8% EPS growth. In 2023, we expect full year reported sales growth to be approximately 5-7% with organic sales growth of approximately 2-4%.1<\/sup> Pricing will drive the organic sales increase with volumes relatively stable. We expect 1st<\/sup> half volumes to be lower year-over-year due to continued softness in our discretionary categories, with a return to volume growth in the 2nd<\/sup> half.\u201d\n<\/p>\n \nMr. Farrell continued, \u201cOur Adjusted EPS expectation for 2023 is 0-4% growth. We intend to sustain the current momentum in consumption by increasing marketing as a percentage of net sales to approximately 10.5% (10% in 2022), or a $30 million higher investment. In addition, the company\u2019s incentive compensation plan is expected to return to normal levels in 2023, adding another $30 million of expense. These important investments in our brands and people represent a 6% drag vs 2022 Adjusted EPS. Our tax rate, which is expected to increase to approximately 23% (210 basis point increase), and higher interest expense (excluding debt related to Hero) creates another 2% drag to Adjusted EPS. This outlook reflects strong operating fundamentals including organic growth, gross margin expansion, marketing investments, and operating income growth.\n<\/p>\n \n\u201cWe expect full year reported gross margin to expand approximately 100 to 120 basis points versus 2022, as we expect pricing and productivity to more than offset inflation. Gross margin is expected to benefit from pricing, pack size changes, laundry concentration and the full year impact of the higher margin HERO business. This outlook includes incremental inflation headwinds of $125 million due to higher commodity and materials costs. However, we are seeing signs of inflation moderating in 2023. Supply chain fill levels continue to show improvement and we expect a return to pre-pandemic levels in the second half of 2023 as incremental capacity comes online.\n<\/p>\n \n\u201cOperating profit is expected to increase 4% to 8% reflecting the strength of the business. We expect 2023 adjusted operating profit margin to be relatively flat compared to 2022 adjusted operating margin, which reflects the increased investment in marketing as well as significantly higher SG&A due to normalized incentive compensation and investments in our international infrastructure.1<\/sup><\/p>\n \n\u201cOther expense for 2023 is expected to be approximately $110 million reflecting a significant increase in interest expense due to higher rates on floating rate debt as well as debt related to the recent acquisition of HERO.\n<\/p>\n \n\u201cCash flow from operations is expected to be approximately $925 million, an increase of 4.5% compared to 2022. We expect 2023 capital expenditures of approximately $250 million as we continue to make capacity investments and expect to return to historical levels (2% of sales) by 2025. We expect to pursue accretive acquisitions that meet our strict criteria, with an emphasis on fast-moving consumable products, similar to our last 3 acquisitions (ZICAM, THERABREATH, and HERO).\n<\/p>\n \n\u201cFor Q1, we expect reported sales growth of approximately 4%, organic sales growth of approximately 1%1<\/sup>, gross margin expansion and higher marketing and SG&A spending. As a result, we expect Adjusted EPS of $0.752<\/sup> per share, a 10% decrease from last year\u2019s adjusted Q1 EPS, which reflected a strong 2022 prior to the downturn in the economy.1<\/sup> We expect Q1 revenue and profits to continue to be negatively impacted by softness in discretionary brands and the timing of equity grants.\u201d\n<\/p>\n 1<\/sup> See non-GAAP reporting reconciliations included at the end of this release.\n<\/p>\n 2<\/sup> The Q1 and full year 2023 adjusted EPS will exclude the impact of charges related to restricted stock that was issued for the Hero acquisition, which will be treated as compensation expense. This charge is expected to negatively impact 2023 reported EPS by $0.03 in Q1 2023 and $0.12 for the full year of 2023.\n<\/p>\n \nChurch & Dwight Co., Inc. (NYSE: CHD) will host a conference call to discuss fourth quarter and year end 2022 results on February 3, 2023, at 1:00 p.m. (ET). The presentation will broadcast online at investor.churchdwight.com\/investors\/news-events<\/a>. Click on Church & Dwight Co., Inc. Analyst Day 2023 to register for the webcast.\n<\/p>\n
\nChurch & Dwight Co., Inc. (NYSE: CHD) today announced full year net sales increased 3.6% to $5,375.6 million including a 1% drag from currency, exceeding the Company\u2019s outlook of 3%. Organic sales increased 1.4% due to positive pricing of 6.5%, partially offset by a volume decline of 5.1%.1<\/sup><\/p>\n