UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2015
Commission file number 1-10585
CHURCH & DWIGHT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
13-4996950 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
500 Charles Ewing Boulevard, Ewing, N.J. 08628
(Address of principal executive offices)
Registrant’s telephone number, including area code: (609) 806-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Name of each exchange on which registered |
Common Stock, $1 par value |
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
x |
|
Accelerated filer |
|
¨ |
|
|
|
|
|||
Non-accelerated filer |
|
¨ |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 31, 2015, there were 130,948,538 shares of Common Stock outstanding.
PART I
Item |
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Page |
1. |
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3 |
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2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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21 |
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3. |
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28 |
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4. |
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29 |
PART II
1. |
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|
30 |
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1A. |
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30 |
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2. |
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30 |
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6. |
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32 |
2
PART I – FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share data)
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Net Sales |
$ |
847.1 |
|
|
$ |
808.3 |
|
|
$ |
1,659.4 |
|
|
$ |
1,590.3 |
|
Cost of sales |
|
474.0 |
|
|
|
451.9 |
|
|
|
930.8 |
|
|
|
894.5 |
|
Gross Profit |
|
373.1 |
|
|
|
356.4 |
|
|
|
728.6 |
|
|
|
695.8 |
|
Marketing expenses |
|
115.8 |
|
|
|
113.4 |
|
|
|
204.6 |
|
|
|
201.2 |
|
Selling, general and administrative expenses |
|
115.0 |
|
|
|
104.8 |
|
|
|
209.6 |
|
|
|
194.4 |
|
Income from Operations |
|
142.3 |
|
|
|
138.2 |
|
|
|
314.4 |
|
|
|
300.2 |
|
Equity in earnings (losses) of affiliates |
|
(13.8 |
) |
|
|
2.9 |
|
|
|
(11.5 |
) |
|
|
4.5 |
|
Investment earnings |
|
0.5 |
|
|
|
0.6 |
|
|
|
1.0 |
|
|
|
1.1 |
|
Other income (expense), net |
|
(1.6 |
) |
|
|
0.2 |
|
|
|
(3.6 |
) |
|
|
(0.5 |
) |
Interest expense |
|
(7.9 |
) |
|
|
(6.9 |
) |
|
|
(15.5 |
) |
|
|
(13.6 |
) |
Income before Income Taxes |
|
119.5 |
|
|
|
135.0 |
|
|
|
284.8 |
|
|
|
291.7 |
|
Income taxes |
|
45.8 |
|
|
|
46.2 |
|
|
|
103.9 |
|
|
|
100.3 |
|
Net Income |
$ |
73.7 |
|
|
$ |
88.8 |
|
|
$ |
180.9 |
|
|
$ |
191.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Basic |
|
130.9 |
|
|
|
134.8 |
|
|
|
131.4 |
|
|
|
136.4 |
|
Weighted average shares outstanding - Diluted |
|
133.4 |
|
|
|
137.3 |
|
|
|
134.0 |
|
|
|
138.9 |
|
Net income per share - Basic |
$ |
0.56 |
|
|
$ |
0.66 |
|
|
$ |
1.38 |
|
|
$ |
1.40 |
|
Net income per share - Diluted |
$ |
0.55 |
|
|
$ |
0.65 |
|
|
$ |
1.35 |
|
|
$ |
1.38 |
|
Cash dividends per share |
$ |
0.335 |
|
|
$ |
0.31 |
|
|
$ |
0.67 |
|
|
$ |
0.62 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Net Income |
$ |
73.7 |
|
|
$ |
88.8 |
|
|
$ |
180.9 |
|
|
$ |
191.4 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustments |
|
19.6 |
|
|
|
6.1 |
|
|
|
(4.7 |
) |
|
|
4.5 |
|
Defined benefit plan adjustments |
|
3.9 |
|
|
|
0.7 |
|
|
|
3.9 |
|
|
|
0.7 |
|
Income (loss) from derivative agreements |
|
(1.5 |
) |
|
|
(0.9 |
) |
|
|
1.4 |
|
|
|
(0.9 |
) |
Other comprehensive income |
|
22.0 |
|
|
|
5.9 |
|
|
|
0.6 |
|
|
|
4.3 |
|
Comprehensive income |
$ |
95.7 |
|
|
$ |
94.7 |
|
|
$ |
181.5 |
|
|
$ |
195.7 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share and per share data)
|
June 30, |
|
|
December 31, |
|
||
|
2015 |
|
|
2014 |
|
||
Assets |
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
203.2 |
|
|
$ |
423.0 |
|
Accounts receivable, less allowances of $0.9 and $1.9 |
|
340.4 |
|
|
|
322.9 |
|
Inventories |
|
270.8 |
|
|
|
245.9 |
|
Deferred income taxes |
|
14.0 |
|
|
|
14.4 |
|
Other current assets |
|
19.7 |
|
|
|
26.3 |
|
Total Current Assets |
|
848.1 |
|
|
|
1,032.5 |
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
|
615.5 |
|
|
|
616.2 |
|
Equity Investment in Affiliates |
|
8.8 |
|
|
|
24.8 |
|
Trade Names and Other Intangibles, Net |
|
1,290.7 |
|
|
|
1,272.4 |
|
Goodwill |
|
1,354.4 |
|
|
|
1,325.0 |
|
Other Assets |
|
110.7 |
|
|
|
110.4 |
|
Total Assets |
$ |
4,228.2 |
|
|
$ |
4,381.3 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Short-term borrowings |
$ |
123.6 |
|
|
$ |
146.7 |
|
Current portion of long-term debt |
|
250.0 |
|
|
|
249.9 |
|
Accounts payable and accrued expenses |
|
507.3 |
|
|
|
507.7 |
|
Income taxes payable |
|
4.6 |
|
|
|
1.0 |
|
Total Current Liabilities |
|
885.5 |
|
|
|
905.3 |
|
|
|
|
|
|
|
|
|
Long-term Debt |
|
700.1 |
|
|
|
698.6 |
|
Deferred Income Taxes |
|
484.1 |
|
|
|
484.1 |
|
Deferred and Other Long-term Liabilities |
|
159.4 |
|
|
|
163.1 |
|
Pension, Postretirement and Postemployment Benefits |
|
27.5 |
|
|
|
28.3 |
|
Total Liabilities |
|
2,256.6 |
|
|
|
2,279.4 |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
Preferred Stock, $1.00 par value, Authorized 2,500,000 shares; none issued |
|
0.0 |
|
|
|
0.0 |
|
Common Stock, $1.00 par value, Authorized 300,000,000 shares; 146,427,550 shares issued |
|
146.4 |
|
|
|
146.4 |
|
Additional paid-in capital |
|
371.3 |
|
|
|
364.8 |
|
Retained earnings |
|
2,508.3 |
|
|
|
2,414.9 |
|
Accumulated other comprehensive loss |
|
(34.1 |
) |
|
|
(34.7 |
) |
Common stock in treasury, at cost: 15,626,311 shares in 2015 and 13,075,944 shares in 2014 |
|
(1,020.3 |
) |
|
|
(789.5 |
) |
Total Stockholders' Equity |
|
1,971.6 |
|
|
|
2,101.9 |
|
Total Liabilities and Stockholders’ Equity |
$ |
4,228.2 |
|
|
$ |
4,381.3 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(In millions)
|
Six Months Ended |
|
|||||
|
June 30, |
|
|
June 30, |
|
||
|
2015 |
|
|
2014 |
|
||
Cash Flow From Operating Activities |
|
|
|
|
|
|
|
Net Income |
$ |
180.9 |
|
|
$ |
191.4 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation expense |
|
29.6 |
|
|
|
29.4 |
|
Amortization expense |
|
21.8 |
|
|
|
16.3 |
|
Deferred income taxes |
|
10.6 |
|
|
|
8.9 |
|
Equity in net earnings of affiliates |
|
(5.5 |
) |
|
|
(4.5 |
) |
Distributions from unconsolidated affiliates |
|
5.4 |
|
|
|
4.3 |
|
Non-cash pension settlement charge |
|
8.4 |
|
|
|
0.0 |
|
Non-cash compensation expense |
|
12.4 |
|
|
|
12.8 |
|
Asset impairment charge and other asset write-offs |
|
17.4 |
|
|
|
5.5 |
|
Other |
|
0.8 |
|
|
|
(0.2 |
) |
Change in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(22.9 |
) |
|
|
(10.2 |
) |
Inventories |
|
(27.6 |
) |
|
|
(18.8 |
) |
Other current assets |
|
0.8 |
|
|
|
(13.8 |
) |
Accounts payable and accrued expenses |
|
12.6 |
|
|
|
(11.1 |
) |
Income taxes payable |
|
20.1 |
|
|
|
14.4 |
|
Excess tax benefit on stock options exercised |
|
(10.7 |
) |
|
|
(12.4 |
) |
Other operating assets and liabilities, net |
|
(5.7 |
) |
|
|
(5.2 |
) |
Net Cash Provided By Operating Activities |
|
248.4 |
|
|
|
206.8 |
|
Cash Flow From Investing Activities |
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
(34.0 |
) |
|
|
(17.1 |
) |
Acquisition |
|
(74.9 |
) |
|
|
0.0 |
|
Other |
|
(2.0 |
) |
|
|
(0.9 |
) |
Net Cash Used In Investing Activities |
|
(110.9 |
) |
|
|
(18.0 |
) |
Cash Flow From Financing Activities |
|
|
|
|
|
|
|
Short-term debt borrowings (repayments) |
|
(23.0 |
) |
|
|
(0.9 |
) |
Proceeds from stock options exercised |
|
15.7 |
|
|
|
17.9 |
|
Excess tax benefit on stock options exercised |
|
10.7 |
|
|
|
12.4 |
|
Payment of cash dividends |
|
(87.5 |
) |
|
|
(84.6 |
) |
Purchase of treasury stock |
|
(263.1 |
) |
|
|
(435.0 |
) |
Other |
|
(0.7 |
) |
|
|
(0.1 |
) |
Net Cash Used In Financing Activities |
|
(347.9 |
) |
|
|
(490.3 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
(9.4 |
) |
|
|
1.5 |
|
Net Change In Cash and Cash Equivalents |
|
(219.8 |
) |
|
|
(300.0 |
) |
Cash and Cash Equivalents at Beginning of Period |
|
423.0 |
|
|
|
496.9 |
|
Cash and Cash Equivalents at End of Period |
$ |
203.2 |
|
|
$ |
196.9 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW-CONTINUED
(Unaudited)
(In millions)
|
Six Months Ended |
|
|||||
|
June 30, |
|
|
June 30, |
|
||
|
2015 |
|
|
2014 |
|
||
Cash paid during the year for: |
|
|
|
|
|
|
|
Interest (net of amounts capitalized) |
$ |
14.5 |
|
|
$ |
12.5 |
|
Income taxes |
$ |
76.8 |
|
|
$ |
89.3 |
|
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
|
Property, plant and equipment expenditures included in Accounts Payable |
$ |
4.5 |
|
|
$ |
5.1 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2015 and 2014
(Unaudited)
(In millions)
|
Number of Shares |
|
|
Amounts |
|
||||||||||||||||||||||||||||||||||
|
Common Stock |
|
|
Treasury Stock |
|
|
Common Stock |
|
|
Additional Paid-In Capital |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Treasury Stock |
|
|
Total Church & Dwight Co., Inc. Stockholders' Equity |
|
|
Noncontrolling Interest |
|
|
Total Stockholders' Equity |
|
||||||||||
December 31, 2013 |
|
146.4 |
|
|
|
(7.5 |
) |
|
$ |
146.4 |
|
|
$ |
352.9 |
|
|
$ |
2,168.5 |
|
|
$ |
0.2 |
|
|
$ |
(368.1 |
) |
|
$ |
2,299.9 |
|
|
$ |
0.1 |
|
|
$ |
2,300.0 |
|
Net income |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
191.4 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
191.4 |
|
|
|
0.0 |
|
|
|
191.4 |
|
Other comprehensive income (loss) |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
4.3 |
|
|
|
0.0 |
|
|
|
4.3 |
|
|
|
0.0 |
|
|
|
4.3 |
|
Cash dividends |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(84.6 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(84.6 |
) |
|
|
0.0 |
|
|
|
(84.6 |
) |
Stock purchases |
|
0.0 |
|
|
|
(6.2 |
) |
|
|
0.0 |
|
|
|
(17.5 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(417.5 |
) |
|
|
(435.0 |
) |
|
|
0.0 |
|
|
|
(435.0 |
) |
Stock based compensation expense and stock option plan transactions, including related income tax benefits of $12.7 |
|
0.0 |
|
|
|
0.8 |
|
|
|
0.0 |
|
|
|
7.6 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
34.8 |
|
|
|
42.4 |
|
|
|
0.0 |
|
|
|
42.4 |
|
Other stock issuances |
|
0.0 |
|
|
|
0.1 |
|
|
|
0.0 |
|
|
|
0.5 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.9 |
|
|
|
1.4 |
|
|
|
0.0 |
|
|
|
1.4 |
|
June 30, 2014 |
|
146.4 |
|
|
|
(12.8 |
) |
|
$ |
146.4 |
|
|
$ |
343.5 |
|
|
$ |
2,275.3 |
|
|
$ |
4.5 |
|
|
$ |
(749.9 |
) |
|
$ |
2,019.8 |
|
|
$ |
0.1 |
|
|
$ |
2,019.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
146.4 |
|
|
|
(13.1 |
) |
|
$ |
146.4 |
|
|
$ |
364.8 |
|
|
$ |
2,414.9 |
|
|
$ |
(34.7 |
) |
|
$ |
(789.5 |
) |
|
$ |
2,101.9 |
|
|
$ |
0.0 |
|
|
$ |
2,101.9 |
|
Net income |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
180.9 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
180.9 |
|
|
|
0.0 |
|
|
|
180.9 |
|
Other comprehensive income (loss) |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.6 |
|
|
|
0.0 |
|
|
|
0.6 |
|
|
|
0.0 |
|
|
|
0.6 |
|
Cash dividends |
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(87.5 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(87.5 |
) |
|
|
0.0 |
|
|
|
(87.5 |
) |
Stock purchases |
|
0.0 |
|
|
|
(3.2 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(263.1 |
) |
|
|
(263.1 |
) |
|
|
0.0 |
|
|
|
(263.1 |
) |
Transfer of stock for settlement of share repurchase agreement |
|
0.0 |
|
|
|
0.1 |
|
|
|
0.0 |
|
|
|
(4.1 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
4.1 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
Stock based compensation expense and stock option plan transactions, including related income tax benefits of $10.7 |
|
0.0 |
|
|
|
0.6 |
|
|
|
0.0 |
|
|
|
10.6 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
28.2 |
|
|
|
38.8 |
|
|
|
0.0 |
|
|
|
38.8 |
|
June 30, 2015 |
|
146.4 |
|
|
|
(15.6 |
) |
|
$ |
146.4 |
|
|
$ |
371.3 |
|
|
$ |
2,508.3 |
|
|
$ |
(34.1 |
) |
|
$ |
(1,020.3 |
) |
|
$ |
1,971.6 |
|
|
$ |
0.0 |
|
|
$ |
1,971.6 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
7
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In millions, except per share data)
1. |
Basis of Presentation |
The condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, the condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2015 and June 30, 2014, and the condensed consolidated statements of cash flow and stockholders’ equity for the six months ended June 30, 2015 and June 30, 2014 have been prepared by Church & Dwight Co., Inc. (the “Company”). In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2015 and results of operations and cash flows for all periods presented have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “Form 10-K”). The results of operations for the period ended June 30, 2015 are not necessarily indicative of the operating results for the full year.
The Company incurred research and development expenses in the second quarter of 2015 and 2014 of $18.3 and $14.4, respectively. The Company incurred research and development expenses in the first six months of 2015 and 2014 of $32.1 and $27.5, respectively. These expenses are included in selling, general and administrative expenses.
2. |
New Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance that clarifies the principles for recognizing revenue. The guidance provides that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to receive for those goods or services. The guidance is effective for annual and interim periods beginning after December 15, 2017, and allows companies to apply the requirements retrospectively, either to all prior periods presented or through a cumulative adjustment in the year of adoption. Early adoption is allowed for annual and interim periods beginning after December 15, 2016. The Company is currently evaluating the impact, if any, that the adoption of the guidance will have on its consolidated financial position, results of operations or cash flows.
In April 2015, the FASB issued guidance that changes the presentation of certain debt issuance costs in the financial statements. The guidance requires debt issuance costs to be presented as a direct deduction from the associated debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The guidance is effective for interim and annual reporting periods beginning after December 15, 2015, and will be applied retrospectively for each prior period presented in the financial statements. This guidance is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In April 2015, the FASB issued guidance that clarifies the accounting treatment for cloud computing arrangements. The guidance provides that if an arrangement includes a software license, then the software license element should be accounted for consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the arrangement should be accounted for as a service contract. This guidance is effective for interim and annual periods beginning after December 15, 2015, and may be applied retrospectively or prospectively. This guidance is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In July 2015, the FASB issued guidance on simplifying the measurement of inventory. Inventory within the scope of this update is required to be measured at the lower of its cost or net realizable value, with net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted, and will be applied prospectively. The Company is currently evaluating the impact, if any, that the adoption of the guidance will have on its consolidated financial position, results of operations or cash flows.
There have been no accounting pronouncements issued but not yet adopted by the Company, which are currently expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
8
Inventories consist of the following:
|
June 30, |
|
|
December 31, |
|
||
|
2015 |
|
|
2014 |
|
||
Raw materials and supplies |
$ |
84.3 |
|
|
$ |
70.8 |
|
Work in process |
|
34.5 |
|
|
|
25.0 |
|
Finished goods |
|
152.0 |
|
|
|
150.1 |
|
Total |
$ |
270.8 |
|
|
$ |
245.9 |
|
4. |
Property, Plant and Equipment, Net (“PP&E”) |
PP&E consists of the following:
|
June 30, |
|
|
December 31, |
|
||
|
2015 |
|
|
2014 |
|
||
Land |
$ |
25.4 |
|
|
$ |
25.5 |
|
Buildings and improvements |
|
303.0 |
|
|
|
281.7 |
|
Machinery and equipment |
|
644.2 |
|
|
|
599.3 |
|
Software |
|
86.3 |
|
|
|
86.4 |
|
Office equipment and other assets |
|
60.7 |
|
|
|
57.2 |
|
Construction in progress |
|
25.9 |
|
|
|
71.5 |
|
Gross Property, Plant and Equipment |
|
1,145.5 |
|
|
|
1,121.6 |
|
Less accumulated depreciation and amortization |
|
530.0 |
|
|
|
505.4 |
|
Net Property, Plant and Equipment |
$ |
615.5 |
|
|
$ |
616.2 |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Depreciation and amortization on PP&E |
$ |
15.0 |
|
|
$ |
14.7 |
|
|
$ |
29.6 |
|
|
$ |
29.4 |
|
Interest charges capitalized (in construction in progress) |
$ |
0.1 |
|
|
$ |
0.1 |
|
|
$ |
0.4 |
|
|
$ |
0.3 |
|
The decrease in construction in progress is due to the completion of the Company’s new vitamin manufacturing facility in York, Pennsylvania.
5. |
Earnings Per Share (“EPS”) |
Basic EPS is calculated based on income available to holders of the Company’s common stock (“Common Stock”) and the weighted average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential Common Stock issuable pursuant to the exercise of outstanding stock options.
The following table sets forth a reconciliation of the weighted average number of shares of Common Stock outstanding to the weighted average number of shares outstanding on a diluted basis:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Weighted average common shares outstanding - basic |
|
130.9 |
|
|
|
134.8 |
|
|
|
131.4 |
|
|
|
136.4 |
|
Dilutive effect of stock options |
|
2.5 |
|
|
|
2.5 |
|
|
|
2.6 |
|
|
|
2.5 |
|
Weighted average common shares outstanding - diluted |
|
133.4 |
|
|
|
137.3 |
|
|
|
134.0 |
|
|
|
138.9 |
|
Antidilutive stock options outstanding |
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.8 |
|
9
The following table provides a summary of option activity during the six months ended June 30, 2015:
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|||
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|||
|
Options |
|
|
Price |
|
|
Term |
|
|
Value |
|
||||
Outstanding at December 31, 2014 |
|
8.5 |
|
|
$ |
45.50 |
|
|
|
|
|
|
|
|
|
Granted |
|
1.1 |
|
|
|
83.81 |
|
|
|
|
|
|
|
|
|
Exercised |
|
(0.6 |
) |
|
|
27.33 |
|
|
|
|
|
|
|
|
|
Cancelled |
|
(0.1 |
) |
|
|
61.90 |
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2015 |
|
8.9 |
|
|
$ |
51.14 |
|
|
|
6.3 |
|
|
$ |
270.3 |
|
Exercisable at June 30, 2015 |
|
5.1 |
|
|
$ |
36.91 |
|
|
|
4.6 |
|
|
$ |
226.2 |
|
The following table provides information regarding the intrinsic value of stock options exercised and stock compensation expense related to stock option awards.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
Intrinsic Value of Stock Options Exercised |
$ |
8.5 |
|
|
$ |
20.9 |
|
|
$ |
32.3 |
|
|
$ |
37.2 |
|
Stock Compensation Expense Related to Stock Option Awards |
$ |
9.7 |
|
|
$ |
9.7 |
|
|
$ |
11.4 |
|
|
$ |
11.8 |
|
Issued Stock Options |
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
Weighted Average Fair Value of Stock Options issued (per share) |
$ |
13.73 |
|
|
$ |
12.84 |
|
|
$ |
13.73 |
|
|
$ |
12.84 |
|
Fair Value of Stock Options Issued |
$ |
14.8 |
|
|
$ |
14.6 |
|
|
$ |
14.8 |
|
|
$ |
14.6 |
|
The following table provides a summary of the assumptions used in the valuation of issued stock options:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |