Financial Analysis Report: Comprehensive Financial Statement Analysis

This report presents a comprehensive financial analysis of a company, examining various aspects of its financial performance. The analysis begins with an assessment of the income statement, identifying any special items and their impact on net income. It then delves into the balance sheet, evaluating total assets, their composition, and any changes from the previous year, including an examination of intangible assets. The report also scrutinizes the company's liabilities and stockholder equity, noting any increases or decreases and the number of outstanding shares. Furthermore, it explores executive compensation, related party transactions, and the key differences between 10-K and 10-Q reports. The report also examines the company's management team and factors affecting its business, including changes in management culture and strategy, and concludes with an overall impression of the company's financial health and future prospects, referencing relevant articles and reports to support the analysis. The report provides an in-depth understanding of the company's financial position and performance.

ANALYSIS
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SUBJECT: ANALYSIS

ANALYSIS 2
11) Income statement of the Entity
In the income statement the special item can be defined as the large or one-time expense of the
entity or the source of the income that the entity will not be expected to recur in future years.
Special items are reported in the income statement and are separated out from the other
categories of income and expenses so that the investors can have more clear understanding of the
financial position of the entity. The special item includes extraordinary expenses, charges of
restructuring, gains from the elimination of debt and any earning from the discontinued
operations. The income statement of the given entity does not comprise of any special item as
there is only ordinary income and expenses reported by the entity in its income statement.

ANALYSIS 3
12) Assets of the Company
The total assets of the given company are $6069.2 million which is more as compared to the
previous year which is $6014.8. There is increase in the amount of the total assets of the given
entity. The assets of the company have various types of assets such as current and non-current
assets. The major five constituent of the assets of the entity are trade names and other intangibles
amounting $2274million, goodwill amounting 1992.9 million, property plant and equipment
amounting $598.2 million, inventories amounting $382.8 million and accounts receivable which
amounts to $345.3 million. The assets of the company also comprises of intangible assets which
includes trade mark and other intangibles and goodwill. Trademark is a type of intangible asset
that legally prevents others from utilizing the name of the business, logo or other brand related
items (Church & Dwight 2018). It is generally referred as the design or symbol in relation to the
product or business. The goodwill of the company can be described as the intangible assets
which are recognized when one business acquires another entity. It describes the reputation of
the entity.

ANALYSIS 4
13) Liabilities of the Company
The liabilities of the company in the year 2018 are $3615.4 million and in the previous year the
amount of the total liabilities is $3796.8 million. Thus, there is decrease in the amount of the
total liabilities of the entity which states that the company has paid off its liabilities in the current
year. The total liabilities of the entity are comprised into two segments such as current liabilities
and non-current liabilities. The liability which forms major part of the amount of the total
liabilities which includes long term debt that amounts to $1508.8 million, accounts payable and
accrued expenses amounting $725.1 million, current portion of the debt which amounts to $596.5
million, deferred income taxes with amount of $576.4 million and deferred and other long-term
liabilities amounting to $203.9 million.
14) Total stockholder equity of the entity:
The amount of the total stockholder equity of the entity in the current year is $2453.8 million and
in the previous year the amount of the equity is $2218 million. Thus, it states that there is
increase in the amount of the owner equity in current year as compared to previous year and it is
due to increase in the amount of the retained earnings and additional paid in capital (Church &
Dwight 2018). The common stock of the entity consists of the 292,855,100 outstanding or issued
shares at the end of the current year and there is no increase or decrease in the number of the

ANALYSIS 5
share outstanding at the end of the current year as compared to previous year which means that
there is no issue or buy back of the share of the entity.
15) Executive Compensation
The executive compensation refers to the monetary and non-monetary payments given to the top
management in return for their services provided to the entity. In other words it is the
remuneration package given to the top management of the organization for their work on the
behalf of the company. The types of employees who are entitled to executive compensation are
presidents, CEO, CFO and other senior executives (Proxy Statement). The key elements in the
executive pay include base salary, retirement packages, executive perks and other benefits and
perquisites. There is increase in the base salary by 3% and there is no change in the annual
incentive plan. The participant can elect to defer up to 85% of each of their salary and annual
incentive plan award payout (Chingos, Peter T 2004.).

ANALYSIS 6
16) Related Party Transactions:
The company is having related party transactions which states that the entity is having
transaction with the persons or entities having more than fifty percent of the ownership. The
entity is having balances and transactions between the company and each of Armand and
Armakaleen in which the entity is having 50% of the ownership interest. The related part
transactions include purchases and sales made by the company. (Junxiong et al. 2018) Another
transaction relates to the outstanding balances of the account receivables and accounts payable.
In addition to this related party transaction includes administration and management oversight
services which is billed by the entity and recorded as a reduction in the selling expenses.

ANALYSIS 7
17) Important difference between the 10-K and 10-Q reports
The form 10-Q was filed in July 31, 2019 for the period ending June 30, 2019 and it includes the
unaudited financial statements and provides the continuing view of the financial position of the
entity during the year. The report should be filed for each of the three fiscal quarters of the fiscal
year for the entity. There is no filing after the fourth quarter because this is the period for which
the report 10-K is filed. The most important difference between the 10-K and 10-Q report is that
10-Q presents the quarterly results of the entity during the year which is an unaudited statement
and the report of 10-K presents the audited financial result of the entity for the complete fiscal
year. Further 10-K report is an annual report and more comprehensive report as compared to the
10-Q report. In addition to this 10-K report is dependent on 10-Q report.
18) Management teams
The management of the entity comprises of various executive members who are important for
the smooth functioning of the entity (Natalia 2013). The management team of the entity can be
discussed as below:
1. Mattew T. Farrell: Mr. Farrell has been Chairman since May 2019 and President and Chief
Executive Officer since January 2016. From November 2014 to December 2015, he was the
Executive Vice President, Chief Operating Officer, and Chief Financial Officer.
2. Britta Bomhard: She is serving as executive vice president and chief marketing officers.
3. Steven P. Cugine : He serves as executive vice president and international and GNPI.
4. Patrick de Maynadier: He serves executive vice president and general counsel and secretary.
5. Rick Dieker: Executive vice President and chief financial officer.

ANALYSIS 8
6. Carlos Linares: Executive vice president and global R&D
7. Rick Spann: Executive vice president and global operations
8. Paul Wood: Executive vice president-sales
9. Judy Zagorski: Executive vice president-Global human resources
19) Factors affecting business:
According to one article the material change in the management culture and strategy has resulted
in the poorly executed leveraged acquisition, numerous aggressive accounting practices and the
substandard corporate government practices. Due to this the entity faces 35-50% downside risk
to approx $40 to $52 per share (Spruce Point Capital Management 2019). It was believed that the
management of the entity has penetrated the stock portfolios of unsuspecting the retail investors
through the promotion. The management of the entity has changed its accounting and other
tactics to inflate the results. The reason behind selecting these two articles is that this article
states the manner in which the change in the management had affected the business of the entity
and the company is facing many risk such as inflation, technology is another considerable factor
for entity and cost of living is another factor or business risk for the entity (Wolinsky J 2019).

ANALYSIS 9

ANALYSIS 10
20) Impression
The first impression of the given entity is not favorable as in initial stage I believe that the entity
is having good profitability and is among the one of the largest industries in this sector. The
profit of the company in the year 2018 has decreased as compared to the previous year. Although
the company is performing well but the performance of the company has declined over the years.
The quarterly results of the entity for the year 2019 is quite good but due to change in the

ANALYSIS 11
management culture and strategy the entity has executed poorly leveraged acquisition and
adopted various aggressive accounting policies to inflate the results. The results deal of the
acquisition can be interpreted as the signs of struggles and identifies several accounting
abnormalities associated with them. The entity is also showing the sign of the financial strain
with the aggressive accounting policies and management self-enrichment. In my opinion the risk
or reward is not favorable in light of the future growth challenges and accounting changes would
facilitate financial restatement. Thus, the first impression of the entity is not favorable as entity is
having various deficiencies in its management.

ANALYSIS 12
References:
Proxy Statement. Church & Dwight Co. Inc. (2018). Retrieved from
http://investor.churchdwight.com/static-files/7486ca83-722d-4d2a-b09f-1670e339a93f
Church & Dwight Co. Inc. Annual Report (2018). Retrieved from
http://investor.churchdwight.com/static-files/097a431e-6cc0-4a65-9c82-23983ced103a
Spruce Point Capital Management Releases A Strong Sell Research Opinion On Church &
Dwight Co., Inc. (2019). Retrieved from https://www.prnewswire.com/news-releases/spruce-
point-capital-management-releases-a-strong-sell-research-opinion-on-church--dwight-co-inc-
nyse-chd-300912561.html
Wolinsky J. (2019). Church & Dwight Co., Inc. – “Arm Yourself To Get Hammered”. Retrieved
from https://www.valuewalk.com/2019/09/church-dwight-spruce-point/
Junxiong Fang, Gerald J. Lobo, Yinqi Zhang and Yuping Zhao. (2018) Auditing Related Party
Transactions: Evidence from Audit Opinions and Restatements. AUDITING: A Journal of
Practice & Theory 37:2, 73-106.
Natalia Mintchik, Mikhail Pevzner and Gregory Sierra. (2013) Comments of the Standards
Committee of the Auditing Section of the American Accounting Association on PCAOB
Reproposed Auditing Standard on Related Parties. Current Issues in Auditing 7:2, C23-C29.