Church & Dwight (NYSE:CHD), best known for its Arm & Hammer products, doesn't get the attention of consumer-goods big boys such as Procter & Gamble (NYSE:PG), Kimberly-Clark (NYSE:KMB), or Johnson & Johnson (NYSE:JNJ). But you can easily argue that the company is managed just as well as its larger brethren.
Church & Dwight's growth rarely garners much attention, but it's consistent and high-quality. The company's third-quarter earnings report, released this morning, continued that trend. Revenues came in 5% higher than last year, and none of that growth came from acquisitons. Earnings per diluted share likewise rose 9%, to $0.51 this year from $0.47 last year (excluding a charge).
The growth on the income statement is nice, but I'm more impressed by the company's ability to work down its total level of long-term and short-term debt by $140.9 million in the past year while increasing the cash on its balance sheet by $14 million. In addition, the company has kept its working capital growth at a reasonable level.
As dependable as most consumer non-cyclical companies are, many are dealing with higher oil-based commodity costs. Church & Dwight is no exception. The company has done a reasonable job of cutting operating costs to absorb some of the increases, but the company expects that it will begin to raise prices by 4% to more than 10% in the first quarter of next year. It's easy to look at the price increase and see it as a growth opportunity, but all it really does is recapture lost margins.
But the most interesting piece of information in the company's earnings release and conference call is the launch of its "Elexa by Trojan" line of female-oriented sexual health products. The Elexa line, including condoms, will be located in the feminine-care aisle of stores, which the company believes should remove some of the embarrassment women may otherwise face when purchasing contraceptives. Time will tell whether the strategy will lead to increased sales, but it appears sound. Church & Dwight has a strong history of taking simple products that people need and adding enough value to them to make consumers willingly pay a premium price.
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Nathan Parmelee has no financial stake in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.
