Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — Investor Day (January 2020)
170 slides from Church & Dwight's investor day presentation, Jan 31, 2020
Slide 1: Church & Dwight's Analyst Day 2020
CHURCH & DWIGHT’S ANALYST DAY 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements, including, among others, statements relating to net sales and earnings growth; gross margin changes; trade and marketing spending; marketing expense as a percentage of net sales; sufficiency of cash flows from operations; e
Slide 3: Who From Management Is With Us Today?
WHO FROM MANAGEMENT IS WITH US TODAY? Matt Farrell Chairman and Chief Executive Officer Britta Bomhard Executive Vice President & Chief Marketing Officer Steve Cugine Executive Vice President of International and GNPI Patrick de Maynadier Executive Vice President & General Counsel and Secretary Rick
Slide 4: The Short Story
The Short Story 2019 was another solid year. We have confidence in our future. Evergreen Model is Healthy Steady US Growth Ahead Digitally Savvy High International Growth Rate Is Sustainable Consistent Innovation Animal Productivity Story Strong 2020 Outlook 4
Slide 5: Deliver Outstanding Returns to Our Shareholders
Deliver Outstanding Returns to Our Shareholders 10 YEAR: 5 YEAR: 3 YEAR: 2019: 20.1% 14.6% 18.5% 8.3% 5
Slide 6: Agenda
01 – Who We Are 02 – Why We Are Winning 03 – ARM & HAMMER Master Brand Update 04 – Consistent Innovation 05 – International Story 06 – Animal Productivity Story 07 - How We Run The Company 08 – Financials
Slide 7: Who We Are
01 Who We Are Matt Farrell, Chairman and Chief Executive Officer 7
Slide 8: We Have an Evergreen Business Model
We Have an Evergreen Business Model 3% Organic Sales Growth 8% EPS Growth 8
Slide 9: Organic Sales Growth for the Last 10 Years
Organic Sales Growth for the Last 10 Years 3.6% 10-year organic sales average 6.0% 5.0% Evergreen 4.0% Model: 3.0% 3.0% 2.0% 1.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 9
Slide 10: Organic Sales – Sources
Organic Sales – Sources 2% United States 3% 6% International 5% Specialty Products 10
Slide 11: Power Brands
Nair. POWER BRANDS
Slide 12: These Brands Drive Our Results
These 12 Brands Drive Our Results more than 80% of sales & profits are represented by these 12 POWER BRANDS 12
Slide 13: Our Portfolio Is Balanced & Diversified
Our Portfolio Is Balanced & Diversified A well-balanced portfolio of household and personal care products. Household: 44% Specialty Products: Personal Care: 49% 7% 13
Slide 14: Diversified Product Portfolio
Diversified Product Portfolio Our Unique Product Portfolio Has Both Value and Premium Products Premium: 63% Value: 37% 14
Slide 15: Long International Runway
Long International Runway U.S. Consumer International Consumer 76% 17% Specialty Products 7%
Slide 16: We Operate in the Land of Giants
We Operate in the Land of Giants Net Sales (billions) $67.4 $58.3 $18.5 $16.1 $15.5 $6.2 $4.4 P&G Unilever Kimberly Clark Reckitt Colgate Clorox Church & Dwight Source: Nasdaq (latest external annual Net Sales) 16
Slide 17: Our Advantage: Nimble Organizational Structure
Our Advantage: Nimble Organizational Structure quick decision easy ability to adapt making communication 17
Slide 18: Long History of Growth Through Acquisitions
Long History of Growth Through Acquisitions Net Sales (Billions) $5.0 $4.4 $4.0 $3.0 $2.0 $1.5 $1.0 $- 2004 2005 2006 2008 2010 2011 2012 2014 2015 2016 2017 2018 2019 Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 18
Slide 19: We Have Clear Acquisition Criteria
We Have Clear Acquisition Criteria Primarily #1 Higher growth, Asset Light Leverage CHD Deliver or #2 share higher margin manufacturing, sustainable brands brands logistics and competitive purchasing advantage 19
Slide 20: Acquired 11 of our 12 Power Brands Since 2001
Acquired 11 of our 12 Power Brands Since 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2005 #1 Extreme Value #2 Battery Powered #1 Condom Laundry Detergent #1 Pregnancy Kit #1 Depilatory Toothbrush Acquired 2006 Acquired 2008 Acquired 2011 Acquired 2012 Acquired 2017 Acquired
Slide 21: 12 Power Brands Today, 20 Tomorrow
12 Power Brands Today, 20 Tomorrow Net Sales (Billions) $5.0 $4.5 12 $4.0 11 $3.5 $3.0 10 9 $2.5 8 $2.0 7 6 $1.5 $1.0 5 $0.5 1 $0.0 1846 2001 2005 2006 2008 2011 2012 2017 2019… Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 21
Slide 22: Why We Are Winning
02 Why We Are Winning
Slide 23: Why We are Winning
Why We are Winning We are in the right categories. We know how to grow share. We have low exposure to private label. We are growing online. We are on trend. 23
Slide 24: We Are in the Right Categories
We Are in the Right Categories 2016 2017 2018 2019 Laundry Stain Fighters Clumping Litter Baking Soda Carpet Deodorizers Condoms Pregnancy Test Kits Toothpaste Battery Toothbrush Toothache Depilatories Dry Shampoo Vitamins Water Flossers Women’s Electric Hair Removal WEIGHTED CATEGORY GROWTH 3.3 2.8
Slide 25: We Know How to Grow Share
We Know How to Grow Share 2016 2017 2018 2019 10 out of 12 power brands maintained or grew share in 2019 Source: Nielsen Total U.S. AOC 25
Slide 26: We Continue to Expand our Share in Laundry
We Continue to Expand our Share in Laundry Total Laundry Detergent Market Share 2016 2019 Δ Procter & Gamble 60.2 61.0 +0.8 14.1 15.3 +1.2 Henkel 18.9 16.3 -2.6 Source: Nielsen Total U.S. AOC 26
Slide 27: Tracked Data Shows Only Part of the Story
Tracked Data Shows Only Part of the Story 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Numerator Insights and Church & Dwight estimates 27
Slide 28: We Have Low Exposure to Private Label
We Have Low Exposure to Private Label Weighted Average Private Label Share of our Categories 20.0% ~12% ~12% 10.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 Source: Nielsen Total U.S. AOC 28
Slide 29: Private Label Shares are Stable
Private Label Shares are Stable Only 5 of our 15 categories have private label exposure PREGNANCY TEST KITS BAKING SODA GUMMY VITAMINS 50% 30% 20% 40% 15% 20% 30% 10% 20% 10% 10% 5% 0% 0% 0% 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 ORAJEL EQUIVALENT C
Slide 30: We Are Growing Online
We Are Growing Online Percentage of Net Sales >9% 8% 7% 5% 2% 1% 2015 2016 2017 2018 2019 2020E 30
Slide 31: We Have #1 Products on Amazon
We Have #1 Products on Amazon Source: 3rd party data 31
Slide 32: We Are On Trend
We Are On Trend
Slide 33: #1 dry shampoo in the world
7M 1 dry shampoo in the world ary 33
Slide 34: Dry Shampoo Usage Among U.S. Women
There are 125 million women 18+ in the U.S. 66% of women don’t wash their hair every day. 13% of women 18+ use dry shampoo. Source: MRI Doublebase 2016*, ^Mintel 2017, ~Lightspeed GMI/Mintel January 2016 34
Slide 35: Growth Driver: Increasing Household Penetration in U.S.
Growth Driver: Increasing Household Penetration in U.S. 7.5% Dry Shampoo 35
Slide 36: U.S. Dry Shampoo Expected to Double
U.S. Dry Shampoo Expected to Double U.S. Dry Shampoo Category: U.K. Population: ~67 million $225M today growing to $450 million! U.S. Population: ~330 million Source: Nielsen 12/19/16 36
Slide 37: #1 women's electric hair remover
#1 women’s electric hair remover 37
Slide 38: Women are looking for convenient ways to remove hair
Women are looking for convenient ways to remove hair. 38
Slide 39: Growth Driver: Increasing Household Penetration in U.S.
Growth Driver: Increasing Household Penetration in U.S. 2% Electric Hair Removal 39
Slide 40: Growth Driver: International Expansion
Growth Driver: International Expansion <2% Electric Hair Removal: Rest of World 40
Slide 41: #1 power flosser recommended by the ADA
#1 power flosser and recommended by the American Dental Association 41
Slide 42: 80% of people don't floss every day
80% of people don’t floss every day even though they know they should. Water flossers are the easiest... 42
Slide 43: Growth Driver: Increasing Household Penetration in U.S.
Growth Driver: Increasing Household Penetration in U.S. 48% 22% Electric Water Toothbrush Flossers 43
Slide 44: Growth Driver: International Expansion
Growth Driver: International Expansion 48% 22% 3-5% Electric Toothbrush: Water Flossers: Water Flossers: U.S. U.S. Europe 44
Slide 45: #1 Adult Gummy Vitamin
vitafusion” #1 Adult Gummy Vitamin ee! Tic wd #] curiny vitamia Band, gh —__ = , Gisfusion pf vtafusion } IE Melatonin Probiotic | Magnesium tothe Digesth
Slide 46: Gummy form is more appealing than pills and capsules
Gummy form is more appealing than pills and capsules. 46
Slide 47: Adult VMS gummy form has increased from 3% to 18% since 2012
Adult VMS gummy form has increased from 3% to18% since 2012. 47
Slide 48: Total Gummy Category Continues to Grow
Total Gummy Category Continues to Grow Category $’s $1,540 $1,322 $1,141 $1,000 $885 Total Gummy Vitamin 2015 2016 2017 2018 2019 Source: Nielsen Total U.S. AOC 48
Slide 49: #1 Hair Fiber #1 Hair Thinning Supplement
#1 Hair Fiber #1 Hair Thinning Supplement 49
Slide 50: 40% of men & women have noticeable hair loss by age 40
40% of men & women have noticeable hair loss by age 40. 50
Slide 51: Master Brand Update
03 Master Brand Update MORE POWER TO YOU Britta Bomhard EVP, Chief Marketing Officer
Slide 52: a BILLION dollar brand
a BILLION dollar brand. 52
Slide 53: ST PT PPPS ENYE AT al,
| i ST PT PPPS ENYE AT 7 al,
Slide 54: The New Campaign is Working
The New Campaign is Working 2.6 million more households are Since 2018, buying ARM & HAMMER products, an increase of 3%. Source: 2018 – 2019 Numerator Panel 54
Slide 55: The New Campaign is Working
The New Campaign is Working Since the launch of the campaign, consumers are spending 5% more on ARM & HAMMER products. 55
Slide 56: Litter box odor is no longer an issue
“Litter box odor is no longer an issue.”
Slide 57: Removes up to 5x more plaque
Removes up to 5x more plaque. MORE POWER TO YOU
Slide 58: Natural, without going overboard
Natural, without going overboard.
Slide 59: Consistent Innovation
04 Consistent Innovation
Slide 60: Slide 60
Slide 61: ARM & HAMMER Clean&Simple
ARM & HAMMER Clean&Simple CLEAN. SIMPLE. SMART. POWERFUL.
Slide 62: Consumers Want "Better for Me" Products
Consumers Want “Better for Me” Products ESTABLISHED EMERGING IN ME ON ME AROUND ME Source: Label Insight Blog & Survey Nielsen Global Sustainability, Survey 2017; 2017 Nielsen Company “Who’s Buying Clean Label Products? It’s Clear: Transparency is Winning in the US Retail Market” 62
Slide 63: Clean with a Simple Ingredient List
No Others Provide a No-Compromise Powerful Clean with a Simple Ingredient List NATURAL SENSITIVE REGULAR
Slide 64: FutureWorks R&D Program Inspires Science-Based Innovation
Church & Dwight FutureWorks R&D Program Inspires Science-Based Innovation Connectivity Innovation Culture Risk-taking Speed
Slide 65: No Dyes, Preservatives, Phosphates, Brighteners, Parabens
NO ® ©@ Dyes Added Preservatives @ @ © Phosphates _ Brighteners Parabens a
Slide 66: Six essential ingredients plus water
hard working cleaner active stain remover laundry booster baking soda water softener essential fragrance ingredients plus water 66
Slide 67: Fewer Ingredients But No Compromise
Fewer Ingredients But No Compromise Clean & Simple™ Plus OxiClean™ AS POWERFUL AS *And Water
Slide 68: Clean&Simple Has Fewer Ingredients Than Typical Liquid Laundry Detergent
ARM & HAMMER Clean&Simple Has Fewer Ingredients than the Typical Liquid Laundry Detergent 6 ingredients 15 30to ingredients 68
Slide 69: booster), sodium bicarbonate (baking soda), trisodium
booster), sodium bicarbonate (baking soda), trisodium f dicarboxe- "|. ciaiiiaie (wai, o..~"°), fragrances. Pal Ce~" wis no phosphates. & a OUR PROMISE TO YOU AND THE PLANET -® >) We help plant a Meets EPA millions of trees SAFER Safer Chores in the Mississippi CHOICE ota fer River Valley For fngred
Slide 70: Did we just hack laundry?
“Did we just hack laundry? Yeah we did!”
Slide 71: Clean & Simple Retail Execution
Retail execution on Clean&Simple launch
Slide 72: Consumers want convenience and sustainability
Consumers want convenience and sustainability. 72
Slide 73: Introducing ARM & HAMMER plus OxiClean Super Concentrated
Introducing ARM & HAMMER plus OxiClean Super Concentrated Laundry Detergent 3x more cleaning power, 37% less plastic and 30% less water. 73
Slide 74: 42% of all wash loads are dark loads
42% of all wash loads are dark loads. 74
Slide 75: ARM & HAMMER Dark Protect
ARM & HAMMER Dark Protect For dark and black fabrics. *on shelves Q4 2019 75
Slide 76: Foam Appeals to Women with Drier Hair
Foam Appeals to Women with Drier Hair THIN & STRAIGHT THICK & TIGHTLY COILED 26% of women experience oily hair 74% of women have normal to dry hair “You lost me at dry!” “Dry shampoos are too drying”
Slide 77: Introducing BATISTE waterless cleansing foam
Introducing BATISTE waterless cleansing foam Instant hair refresh that dries in 60 seconds. strengthen hydrate shine smooth 77
Slide 78: 50 million Americans discussed massage with their doctors
50 million Americans discussed massage with their doctors in 2018. Source: American Massage Therapy Association Consumer Surveys 2018 78
Slide 79: Introducing waterpik Water for Wellness
Introducing waterpik Water for Wellness FDA-registered therapeutic Power Pulse showerhead.
Slide 80: Water for Wellness
wate pi k shewerheads Water for Wellness SOOTHES Muscle Tension hi =i {, INCREASES Flexibility PROMOTES Restful Sleep
Slide 81: Women today are more focused on hair removal
Women today are more focused on hair removal. 81
Slide 82: Introducing FLAWLESS Nu Razor
Introducing FLAWLESS Nu Razor Waterless whole-body hair removal for women…anywhere, anytime. 82
Slide 83: One MAJOR Retailer…
One MAJOR Retailer… 1. The reset FROM TO has happened. 2. Great new launch! FLAWLESS Nu Razor 3. After 2 weeks, POS consumption is up 7%. 83
Slide 84: 2020: Flawless total distribution points +15%
2020: Flawless total distribution points +15% 84
Slide 85: Natural toothpastes are growing 14x the rate of the category
Natural toothpastes are growing 14x the rate of the total category. 85
Slide 86: Introducing ARM & HAMMER Essentials Toothpaste
Introducing ARM & HAMMER Essentials Toothpaste 86
Slide 87: Men want to ensure their partner is satisfied
Men want to ensure their partner is satisfied. 87
Slide 88: Introducing TROJAN G spot
Introducing TROJAN G spot Unique shape provides targeted stimulation. 88
Slide 89: Trojan Man, why do these condoms have such a unique shape?
“Trojan Man, why do these Trojan G. condoms have such a unique shape?”
Slide 90: vitafusion line extensions coming in 2020
Coming in 2020… vitafusion line extensions Addressing even more need states 90
Slide 91: Rapidly Launching New VMS Items
Rapidly Launching New VMS Items, Pacing Category Expansion 7 new items 5 new items 22 new items 17 items new 91
Slide 92: More Innovation to Come in 2020
More Innovation to Come in 2020
Slide 93: International Story
05 International Story
Slide 94: International Evergreen Target: 6%
International Evergreen Target: 6% 2% United States 3% 6% International 5% Specialty Products 94
Slide 95: International Net Sales: Achieving Global Scale
International Net Sales: Achieving Global Scale ~$756 MM 81% ~$535 MM United States 2014 2019 95
Slide 96: International Organic Net Sales: Faster Growth
International Organic Net Sales: Faster Growth NET SALES AVERAGE GROWTH 2012 - 2014 2015 - 2019 ~+3% ~+9% 81% United States Our growth rate has tripled on an increasing larger base … 96
Slide 97: International Net Sales Composition
International Net Sales Composition Australia 7% Mexico 8% Global Markets Group Europe 33% 22% 81% United States Canada 30% 97
Slide 98: International Business is Growing Organically
International Business is Growing Organically Q4 organic sales: 10.6% 10.0% 10.0% 9.2% 8.1% Evergreen 8.0% 7.8% 7.8% growth target 6.0% 6.0% 4.0% 2.0% 0.0% 2015 2016 2017 2018 2019 Note: Organic sales growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most directly compa
Slide 99: 2019 International Organic Growth is Broad
2019 International Organic Growth is Broad Subsidiaries: +5.2% Global Markets Group*: +19.2% *Export business to 130 countries 99
Slide 100: Global Market Group Net Sales 2014 to 2019
Global Market Group Net Sales 2014 to 2019 2014 2015 2016 2017 2018 2019 100
Slide 101: Building Global Capabilities
Building Global Capabilities Expanding Resources – China, SE Asia, Investing in localizing brands Germany and Central America and consumer content Investing in technology to Investing in GMG distributor maintain speed training and regulatory 101
Slide 102: Committed to 6% Organic Growth
Committed to 6% Organic Growth… • Runway for existing brands • Grow acquired brands • Global Markets Group to sustain double digit growth • Investments in Fast Growing Markets 102
Slide 103: Operating Margin Expansion Including Future Investments
… and Operating Margin Expansion Including Future Investments! +190 bps +50 bps +50 bps 13.2% 13.7% 12.7% 10.8% 2019 2020E 2021E 2022E 103
Slide 104: Animal Productivity Story
06 Animal Productivity Story
Slide 105: Specialty Products Evergreen Target: 5%
Specialty Products Evergreen Target: 5% 2% United States 3% 6% International 5% Specialty Products 105
Slide 106: Source of Specialty Product Growth
Source of Specialty Product Growth 6% Animal Productivity 5% 3% Bulk Chemicals 106
Slide 107: The Cyclical Dairy Industry Drives SPD Organic Revenue
The Cyclical Dairy Industry Drives SPD Organic Revenue Organic Sales 30% 22.6% 20% 11.5% 10% 6.0% 3.0% 0% -10% 2011 2014 2017 2020E Class III Milk Price: Historical and Futures 26 24 22 20 CIII ($/cwt) 18 16 14 12 10 2010 2011 2011 2012 2013 2014 2014 2015 2016 2017 2017 2018Source: 2019 2020E 2020
Slide 108: Global population growth drives demand for protein
Global population growth drives demand for protein. World Population (Billion) 9.8 7.7 2019 2050 Est Source: World Wild Life Fund and the Global Footprint Network 108
Slide 109: Antibiotics are Out of Favor
Antibiotics are Out of Favor Consumers Retailers Farmers • no antibiotics ever • no added hormones • no chemicals added 109
Slide 110: 40% decrease in the use of animal antibiotics since 2015
40% decrease in the use of animal antibiotics since 2015. pre-biotics custom probiotics Source: US FDA 110
Slide 111: Natural Solutions
Natural Solutions NUTRITIONAL SUPPLEMENTS 111
Slide 112: Acquisitions Created a More Balanced Business
Acquisitions Created a More Balanced Business… Non-dairy sales expected to grow approximately 20% in 2020. % OF NON-DAIRY SALES 27% <1.0% 2015 2019 112
Slide 113: Increase in Cheese Consumption Offsets Decline in Fluid Milk
Increase in Cheese Consumption More than Offsets Decline in Fluid Milk Consumption It takes 10 pounds of milk to make just 1 pound of cheese Per Capita Consumption (lbs) - USA 174.2 171.5 180. 167.1 163.7 50. 160. 40. 140. 37.2 38.5 39 40 30. 120. 20. 100. 10. 2015 2016 2017 2018 Fluid Milk Consumpt
Slide 114: Positioned for 5% Organic Growth
Positioned for 5% Organic Growth • Trusted brand • Aligned with consumers trend • Multiple species • Global growth 114
Slide 115: How We Run the Company
07 How We Run the Company
Slide 116: We Have FIVE Operating Principles
We Have FIVE Operating Principles 1 Brands Leverage Brands People Brands Consumers Love Love 2 Friend of the Environment 3 Highly productive people in a Leverage People place where people matter 4 Leverage Assets 5 Leverage Acquisitions GOOD shareholder returns become GREAT shareholder returns 116
Slide 117: Brands Consumers Love
Brands Consumers Love Brands People Love 117
Slide 118: Friend of the Environment
Friend of the Environment Company institutes the use of recycled paperboard to package household products. Company introduces Sole sponsor of first pro-environmental wall Earth Day. charts & trading cards as product promotion. Launches first non- polluting, phosphate- free laundry detergent. 118
Slide 119: Friend of the Environment
Friend of the Environment Church & Dwight Approximately 5 million launches trees were planted last year by Church & Dwight ARM & HAMMER Essentials Laundry Detergent. through the Arbor Day Foundation. 100% of global electricity demand supplied by renewable energy sources. 119
Slide 120: Water goal
WATER GOAL: To reduce water and/or wastewater by 25% by 2022 using 2016 as a baseline. 120
Slide 121: Solid waste goal
SOLID WASTE GOAL: To increase solid waste recycling to 75% by the end of 2020. 121
Slide 122: Air goal
AIR GOAL: To achieve 100% carbon neutral status for all global operations by end of 2025. Today, we are at 60% carbon neutral. 122
Slide 123: ESG Recognition
ESG Recognition 2019 Top 100 123
Slide 124: Highly Productive People in a Place Where People Matter
Highly Productive People in a Place Where People Matter Revenue per Employee $1,000 $913K $900 $800 $709K $700K $700 $600 $500 $456K $450K $448K $400 $357K $340K $300 $225K $200 $100 $0 CHD PG CLOROX COLGATE KIMBERLY ENERGIZER EDGEWELL RECKITT NEWELL Source: Most recent 10K filings 124
Slide 125: All Employees Focus on Gross Margin
All Church & Dwight Employees Focus on Gross Margin Gross margin is 25% of all employees’ a n n u a l b o n u s . 125
Slide 126: Key Gross Margin Growth Drivers
Key Gross Margin Growth Drivers Good to Supply Great Cost Chain Optimization Optimization Acquisition New Synergies Products 126
Slide 127: Simple Compensation Structure
Simple Compensation Structure 1. Bonuses are tied 100% to Gross business results. Net Revenue Margin Expansion 2. Equity compensation is 100% stock options. 3. Management is required to be heavily invested in Cash From EPS company stock. Operations 127
Slide 128: Financials
08 Financials Rick Dierker Chief Financial Officer
Slide 129: We Have an Evergreen Business Model
We Have an Evergreen Business Model 3% Organic Sales Growth 8% EPS Growth 129
Slide 130: Evergreen Model
Evergreen Model TSR Model Organic Net Sales Growth +3.0% Gross Margin +25 bps Marketing FLAT SG&A -25 bps Operating Margin ∆ +50 bps EPS Growth 8% 130
Slide 131: Q4 2019 Highlights – Strong Finish
Q4 2019 Highlights – Strong Finish Domestic 3.5% Organic sales growth +4.4% International 10.6% SPD 0.7% Adjusted gross margin +170 bps +120 bps excluding acquisition Marketing change +240 bps 14.2% of sales is the highest spend rate of 2019 SG&A +70 bps Acquisition impact and incremental investment
Slide 132: 2019 Quarterly Organic Sales – Two Year Stacked
2019 Quarterly Organic Sales – Two Year Stacked 9.3% 8.7% 8.7% 8.3% 8.3% 4.9% 3.6% 4.4% 4.4% 4.5% 4.4% 4.7% 4.3% 4.3% 3.8% Q1 Q2 Q3 Q4 FY 2018 2019 132
Slide 133: Full Year 2019 Highlights
Full Year 2019 Highlights Domestic 4.0% International 9.2% Organic sales growth +4.4% SPD -3.3% +60 bps excluding Gross Margin 45.5%, +110 bps acquisition Marketing % 11.8%, +10 bps Adjusted SG&A 14.2%, +60 bps Adjusted EPS +8.8% to $2.47 Cash from Operations $865MM FCF Conversion 128% Organic sales
Slide 134: Gross Margin Expansion in 2019
Gross Margin Expansion in 2019 Q4 2019 Price/Volume/Mix +60 bps +120 bps + Inflation (50) bps (180) bps + Productivity Programs +110 bps +120 bps + Acquisition +10 bps +10 bps Flawless Accounting +40 bps +40 bps Gross Margin Expansion +170 bps +110 bps + Flawless Accounting (40) bps (40) bps Compara
Slide 135: 2020 Outlook
2020 Outlook
Slide 136: 2020: 7-9% EPS Growth
2020: 7-9% EPS Growth 2020 Outlook Domestic +3% International +7% Reported Sales ~6.5% SPD +3% Organic Sales ~3.5% +50 bps excluding prior year Gross Margin +10 bps acquisition accounting Marketing +10 bps SG&A -10 bps +50 bps excluding prior year Adjusted Operating Margin + 10 bps acquisition accou
Slide 137: Full Year 2020 Outlook EPS
Full Year 2020 Outlook EPS Evergreen Model 8% Flawless +2% Tariffs -1% Marketing Investments for New Launches -1% EPS Growth Midpoint of 7-9% 8%
Slide 138: Focus on Adjusted Gross Margin
Focus on Adjusted Gross Margin 45.7% 45.8% 45.0% 45.1% 45.5% 44.4% +50 bps excluding prior year acquisition accounting 2016 2017 2018 2019 2020E Note: Percentages are adjusted gross margin, a non GAAP measure. See appendix for adjustments to gross margin presented in accordance with GAAP. Normalized
Slide 139: Gross Margin Expansion in 2020
Gross Margin Expansion in 2020 2019 2020 Price/Volume/Mix +120 bps +80 bps + Inflation (180) bps (150) bps + Productivity Programs +120 bps +120 bps + Acquisition +10 bps Flawless Accounting +40 bps (40) bps Gross Margin Expansion +110 bps +10 bps + Flawless Accounting (40) bps +40 bps Comparable Gr
Slide 140: Organic Sales – 10 Year Trend
Organic Sales – 10 Year Trend 6.0% 5.0% 10 year average: 4.0% 3.6% 3.0% 2.0% 1.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 140
Slide 141: Volume/Price Mix – Ten Year Trend
Volume/Price Mix – Ten Year Trend 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E -2.0% -3.0% Volume Price Mix 141
Slide 142: Marketing Spend
Marketing Spend 12.2% 12.0% 11.9% 11.7% 11.8% 2016 2017 2018 2019 2020E 142
Slide 143: SG&A Mostly Flat Excluding Acquisition Amortization
“SG&A” Mostly Flat Excluding Acquisition Amortization “flattish” 11.3% 11.6% 11.8% 11.9% 11.8% 2016 2017 2018 2019 2020E Note: Adjusted SG&A is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 143
Slide 144: Consistent Strong Adjusted EPS Growth
Consistent Strong Adjusted EPS Growth ~$2.64- $2.47 $2.69 $2.27 ~7-9% $1.94 8.8% $1.77 17.0% 9.6% 9.3% 2016 2017 2018 2019 2020E Note: Adjusted EPS growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 144
Slide 145: "Best in Class" FCF Conversion
“Best in Class” FCF Conversion 2018 FCF Conversion (%) Church & Dwight 124% Colgate P&G Energizer Clorox Kimberly Clark Reckitt Peer Average 85% Newell 0% 20% 40% 60% 80% 100% 120% 140% Sources: Nasdaq. FCF/Net Income 145
Slide 146: Long Term FCF Conversion vs. Peers
Long Term FCF Conversion vs. Peers Free Cash Flow/Net Income 125% 131% 128% 123% 124% 111% 102% 83% 85% 2015 2016 2017 2018 2019 C&D Peer Avg. Source: Bloomberg 146
Slide 147: Cash Conversion Cycle
Cash Conversion Cycle Tight Control of Working Capital Drives CCC Improvement. 52 40 32 34 36 32 27 21 18 22 21 18 days 16 days excluding 13 Waterpik & Flawless 8 7 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 147
Slide 148: Strong Balance Sheet
Strong Balance Sheet Total Debt/Bank EBITDA 2.6x 2.2x 1.9x <1.9x 1.5x 1.4x 1.2x 1.4x Credit Rating A3/BBB+ 2013 2014 2015 2016 2017 2018 2019 2020E Note: Total debt/EBITA is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. 148
Slide 149: Significant Financial Capacity
Significant Financial Capacity As of December 31, 2019 (in $millions) $150 Cash & Cash Equivalents on Hand Acquisition Power: Leverage Capacity $2.8B $2,650 Current Outstanding Debt $2,100 • 2019 TTM Bank EBITDA = $1,071M • Leverage capacity to 3.75x EBITDA • Example: Acquisition EBITDA multiple of
Slide 150: Prioritized Uses of Free Cash Flow
Prioritized Uses of Free Cash Flow 1 TSR-Accretive M&A 2 Debt Reduction 3 New Product Development 4 Capex For Organic Growth & G2G 5 Return Of Cash To Shareholders 150
Slide 151: Minimal Capital Investment
Minimal Capital Investment Capital Expenditures as a % of Sales 2.0% $100 1.9% 1.8% 1.8% 1.7% $80 $90 1.5% 1.4% 1.4% 1.2% $74 $60 $71 $61 $60 1.0% $40 $50 $45 0.5% $20 $- 0.0% 2014 2015 2016 2017 2018 2019 2020E On-going CapEx % of NS 151
Slide 152: 5.5% Dividend Increase in 2020
5.5% Dividend Increase in 2020 +5.5% +14% +5% 119 +6% +7% +7% consecutive years of dividends +119% +35% 2016 2017 2018 2019 2020 152
Slide 153: High Annual Dividend Growth Rate vs. Peers
High Annual Dividend Growth Rate vs. Peers 10.0% 9.0% Average Annual Dividend 8.0% 8% Growth Rate: 2017, 2018, 2019 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% CLOROX CHD UNILEVER ENERGIZER PG RECKITT COLGATE KIMBERLY peer average 153
Slide 154: Q&A
Slide 155: Church & Dwight Co., Inc.
Slide 156: Reconciliations
Reconciliations www.churchdwight.com 156
Slide 157: Acquisition Accounting Impact
Acquisition Accounting Impact Organic Sales May-Jun Q3 Q4 May-Dec. 2019 Reported $8 $20 $26 $53 Sales 2019 Proforma $28 $60 $43 $131 Sales Organic Adjustment $20 $40 $17 $78 Gross Margin Q2 Q3 Q4 FY 2020 bps impact (30) bps (90) bps (30) bps (40) bps 157
Slide 158: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Church & Dwight Co., Inc.’s Reconciliation of Non-GAAP Measures: The following pages provide definitions of the non-GAAP measures used in this presentation and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. These non-GAAP
Slide 159: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Organic Sales Growth: The presentation provides information regarding organic sales growth, namely net sales growth excluding the effect of acquisitions, divestitures and foreign exchange rate changes, from year-over-year comparisons. Management believes that the
Slide 160: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjusted Gross Profit and Gross Profit Margin This presentation discloses the Company’s Gross Profit and Gross Profit Margin. Adjusted Gross Profit and Gross Profit Margin , as used in this presentation, is defined as gross profit excluding significant one-time it
Slide 161: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjusted EPS: This presentation discloses reported EPS excluding the following, namely, earnings per share calculated in accordance with GAAP adjusted to exclude significant one-time items that are not indicative of the Company’s period to period performance. We b
Slide 162: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjusted SG&A: This presentation discloses the Company’s SG&A expenses as a percent of net sales. Adjusted SG&A, as used in this presentation, is defined as selling, general and administrative expenses excluding significant one-time items that is not indicative of
Slide 163: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjusted Operating Profit and Margin: The presentation discloses Operating Income and margin (a GAAP measure) and Adjusted Operating Income and margin (a non- GAAP measure) which excludes significant one time items. We believe that excluding the significant one-ti
Slide 164: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Free Cash Flow: Free cash flow (a non-GAAP measure) is defined as cash from operating activities (a GAAP measure) less capital expenditures (a GAAP measure). Management views free cash flow as an important measure because it is one factor in determining the amount
Slide 165: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Total Debt to Bank EBITDA: Total Debt to Bank EBITDA is a ratio used in our debt agreements. Bank EBITDA (a non-GAAP measure) is a form of adjusted EBITDA, and represents earnings from Income (a GAAP measure), excluding interest income, interest expense, and befor
Slide 166: Total Company Organic Sales Reconciliation
Total Company Organic Sales Reconciliation Year Reported FX Acq/Div Organic 2019 5.1% -0.5% -1.2% 4.4% 2018 9.8% 0.0% -5.5% 4.3% 2017 8.1% 0.0% -5.4% 2.7% 2016 2.9% 1.2% -0.9% 3.2% 2015 2.9% 2.7% -2.0% 3.6% 166
Slide 167: Reported & Adjusted Non Gaap Reconciliations
Reported & Adjusted Non Gaap Reconciliations For the year ending December 31, 2019 2018 2017 2016 Adjusted Gross Margin Reconciliation Gross margin Reported 45.5% 44.4% 45.8% 45.5% Brazil Charge 0.0% 0.0% 0.0% 0.2% Gross Margin - Adjusted (non-gaap) 45.5% 44.4% 45.8% 45.7% Adjusted SG&A Reconciliati
Slide 168: Reported & Adjusted Non Gaap Reconciliations
Reported & Adjusted Non Gaap Reconciliations For the year ending December 31, 2019 2018 2017 2016 Adjusted EPS Reconciliation EPS - Reported $ 2.44 $ 2.27 $ 2.90 $ 1.75 Pension Settlement Charge $ - $ - $ 0.12 $ - Brazil Charge $ 0.03 $ - $ 0.01 $ 0.02 Joint Venture I mpairment Tax Benefit $ - $ - $
Slide 169: SG&A less Amortization Expense Reconciliation
Church & Dwight Co., Inc. and Subsidiaries SG&A less Amortization Expense Reconciliation 2019 2018 2017 2016 2015 2014 2013 SG&A as % of Net Sales - Reported 14.4% 13.6% 14.4% 12.6% 12.4% 12.0% 13.0% Pension Settlement Charge - - -1.0% 0.0% -0.3% 0.0% 0.0% Brazil Charge -0.2% - -0.1% Passport Earn-o
Slide 170: Total Debt to Bank EBITDA Reconciliation
Church & Dwight Co., Inc Total Debt to Bank EBITDA Reconciliation ($ in millions) 2019 2018 2017 2016 2015 2014 2013 Total Debt as Presented (1) $ 2,063.1 $ 2,107.1 $ 2,374.3 $ 1,120.1 $ 1,050.0 $ 1,086.6 $ 797.3 Other Debt per Covenant (2) 15.9 56.7 59.2 75.1 83.5 88.0 90.3 Total Debt per Credit Ag