Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — IPO Roadshow (September 2012)
121 slides from Church & Dwight's IPO roadshow presentation, Sep 5, 2012
Slide 1: Barclays Conference Presentation
Annex A Barclays Conference Presentation by: Jim Craigie, Chairman & CEO Matt Farrell, EVP & CFO September 5, 2012
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements relating to, among other things, the consummation, financing and impact of the Avid acquisition and anticipated associated cost savings; the effect of product mix; earnings per share; reported net sales growth and organic sa
Slide 3: Agenda
1. Opening Remarks Jim Craigie 2. New Acquisition 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell Agenda Jim Craigie
Slide 4: Key Take-Aways Today: Opening Remarks
4 Key Take-Aways Today ! Opening Remarks
Slide 5: Opening Remarks
Opening Remarks Excellent First Half 2012 Results 6.0% Organic Revenue Growth 6.7% EPS Growth
Slide 6: Opening Remarks
Opening Remarks Strong First Half 2012 Results Continued Tough Business Environment in 2012 Continued Weak Consumer Spending Continued Volatility in Commodities Continued Competitive Pressures Continued Struggle for Retailers
Slide 7: Opening Remarks
Opening Remarks Strong First Half 2012 Results Continued Tough Business Environment in 2012 Aggressive But Achievable 2012 EPS Target • 9-10% Adjusted EPS Growth (Excluding Avid Acquisition)
Slide 8: Strong First Half 2012 Results
Strong First Half 2012 Results Continued Tough Business Environment in 2012 Aggressive But Achievable 2012 Targets Exciting New Acquisition: Avid Health • Fast Growing VMS Business • Plays to CHD Strength Opening Remarks
Slide 9: Agenda
Agenda 1. Opening Remarks Jim Craigie 2. New Acquisition Jim Craigie 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell
Slide 10: 2012 Pending Acquisition: Avid Health, Inc.
Announced Signing of a Stock Purchase Agreement With Avid Health on 8/20/2012; Expected to Close in Q4 2012 Purchase Price $650 Million L’il Critters is the #1 Brand in the Children’s Gummy Vitamin Space Vitafusion is the #1 Brand in the Adult Gummy Vitamin Space Category Growing 6% While Avid Has G
Slide 11: Avid Health Profile
Avid Health Profile Avid Health is a Fast Growing “VMS” (Vitamin/Mineral/Supplement) Business Driven by a Unique Gummy Form and Superior Taste Profile.
Slide 12: Macro Trends Fueling Growth
Macro Trends Fueling Growth: 57% of Adults Use a Nutritional Supplements Improved Health & Fitness Desire of All Ages Aging Population Desire to Maintain Health and Increase Life Expectancy *Source: IRI FDMx 52 Weeks as of March 2012 Adults: $3.3B 5YR CAGR 5% VMS is a Significant Category With Consi
Slide 13: Category Size Gummy % of Category
Category Size Gummy % of Category KIDS 0.2B 58% ADULT 3.3B 3% Gummy is Leading Form of Kids Vitamins But Only 3% Of Adult Vitamins Significant Upside Opportunity for Gummy Form in Adult Vitamins Which Are 16 Times the Size of Kids Vitamin Category.
Slide 14: Children's Vitamin Category
CHILDREN’S VITAMIN CATEGORY $206MM (FDMx) CHILDREN’S GUMMY CATEGORY $120MM (FDMx) *Source: IRI FDMx 52 Weeks as of March 2012 Disney (NBTY) 16% Flintstones , (Bayer) 25% Li'l Critters, 27% P/L 11% All Other 22% Disney (NBTY) 16% Flintstones, (Bayer) 23% Li'l Critters, 45% P/L 11% All Other 5% Avid’s
Slide 15: Adult Gummy Category
ADULT GUMMY CATEGORY $100MM (FDMx) ADULT VITAMIN CATEGORY $3,300MM (FDMx) *Source: IRI FDMx 52 Weeks as of March 2012 Gummy 3% Liquid 6% Tablet 91% One-A-Day (Bayer), 24% P/L 10% Vitafusion, 57% All Other, 9% Avid’s Vitafusion is the #1 Adult Gummy Vitamin
Slide 16: Steady Double Digit Growth in Kids Category
+10% +12% +19% +105% +125% +662% Steady Double Digit Growth in Kids Category Triple Digit Growth in Adult VMS Category $2 $18 $41 $85 Vitafusion: Gross Sales $73 $83 $94 $103 L’il Critters: Gross Sales Avid’s Strong Sales Growth Fueled by Gummy Form Entry Into Adult VMS
Slide 17: Vitafusion & L'il Critters Represent ~80% of Gross Sales
Vitafusion & L’il Critters Brands Represent ~80% of Gross Sales • Private Label is 13%; Specialty Represent 6% Strong Penetration in Club & Mass Channels (+70% Of Sales in Costco, Target, Walmart & Sam’s) Self Manufacturing of Gummies vs. Competitors Use of Co-packers, Provides a Superior Tasting Pr
Slide 18: Meets Most Critical CHD Acquisition Criteria
Primarily #1 or #2 Share Brand Higher Growth Higher Than Corporate Margins Asset Light Sustainable Competitive Advantage CHD Acquisition Criteria Avid Double-digit Growth Rate Opportunity to Expand Gross Margins; Higher EBITDA Margins Low CAPEX Requirements #1 Adult & Kids’ Gummy Best Tasting Gummy
Slide 19: Acquisition Plays to Church & Dwight Strengths
Fragmented Category Provides an Opening for a Strong, Agile Competitor Track Record of Building Market Share in New Categories Field Sales Resources to Expand Distribution Base Internal Manufacturing Know-how on Batch Systems And Packaging Line Economies of Scale in Purchasing and Logistics Understa
Slide 20: Acquisition Impact on CHD EPS Forecast
Core CHD CHD w/ Avid (Q4) Avid Acquisition Expected to Dilute CHD’s EPS by Approximately $.02 in 2012 Due to Transaction Costs, Acquisition Related Expenses, the Effect of Inventory Step-up and Intangible Amortization Avid Acquisition Expected to Add Approximately 4-6% to Core EPS in 2013 In Additio
Slide 21: Continued Great TSR Results
2012 YTD 2011 3 Year 5 Year 10 Year Total Shareholder Return is #1 Priority of CHD Management Team Core CHD Business New Avid Health Acquisition Continued Great TSR Results 21.3% 34.9% 19.1% 17.6% 18.9%
Slide 22: Enjoy the Great Taste Yourself!
Enjoy the Great Taste Yourself! Sample of Vitafusion Gummy Vitamins in CHD Goody Bag!
Slide 23: Agenda
Agenda 1. Opening Remarks Jim Craigie 2. New Acquisition 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell Jim Craigie
Slide 24: Top Drivers: 1. Recession Resistant Product Portfolio
Top Drivers 1. Recession Resistant Product Portfolio
Slide 25: Our Unique Product Portfolio Has Both Value and Premium Products
Our Unique Product Portfolio Has Both Value and Premium Products
Slide 26: Shift From Premium and Mid-Tier to Value Brands
Source: Nielsen Homescan Panel 52 W/E 6/28/08 vs. W/E 12/24/11 Pre-2008 Recession vs. 2011 Recessionary Pressures Have Accelerated the Shift From the Premium and Mid-Tier to Value Brands Buying Households
Slide 27: Liquid Detergent Share by Price Tier
All-outlet 52 Weeks Ending 12/24/11 vs. 52 Weeks Ending 12/29/07 % Liquid Detergent $ Share Priced Tiers Premium 46.0% 39.9% Mid-Priced 27.4% 27.1% Value 23.3% 28.5% Private Label 3.3% 4.5% The Value Price Tier is the Only Growth Tier and Has Now Passed the Mid-Priced Tier to Become the #2 Price Tie
Slide 28: Value Market Shares
2007 2011 Source: Nielsen Channel Views, All-Outlet 52 W/E 12/29/07 vs. 52 W/E 12/24/11 CHD Has Gained +7.1 Share Points in Value Since 2007 – Now 68% Bigger Than #2 Player CHD +7.1 Share Pts. in 4 Years Value : Market Shares
Slide 29: Liquid Detergent Manufacturers Dollar Share
2007 2011 Change Dollar Share Liquid Detergent Manufacturers Source: Nielsen Channel Views, All-Outlet W/E 12/29/07 vs. 52 W/E 12/24/11 Church & Dwight is the Only Liquid Detergent Manufacturer Reporting Significant Share Growth vs. 2007, Gaining +4.1 Points P&G 58.1% 52.6% (5.5%) Sun 16.4% 16.9% +0
Slide 30: 2011 Liquid Detergent Dollar Share Change
Dollar Share Change vs. YAG 2011 Liquid Detergent Share All-Outlet Source: Nielsen All-Outlet 52wks ending 12/24/11 In 2011, Church & Dwight Liquid Detergents Grew Dollar Share More Than All Other Manufacturers (+1.5 pts.) Procter & Gamble 52.6% -1.7 pts. Sun Products 16.9% +0.7 pts. Church & Dwight
Slide 31: H1 2012 Liquid Detergent Dollar Share Change
Dollar Share Change vs. YAG H1 2012 Liquid Detergent Share Source: C&D Custom Nielsen Scanning Database – Expanded AOC wks end 6/23/12 In 1H 2012, Church & Dwight Liquid Detergents Grew Dollar Share More Than All Other Manufacturers (+1.6 pts.) Procter & Gamble 56.7% -0.2 pts. Sun Products 14.9% -0.
Slide 32: Liquid Laundry Washload Shares 2009 vs. 2012
52 Wks end June 2009 52 Wks end June 2012 Share Point Change Liquid Laundry Washload Shares 2009 vs. 2012 Source: C&D Custom Nielsen Scanning Database – Expanded AOC wks end 6/23/12. Based on EQ Washloads CHD is Now Second Only to P&G in Total Washloads Procter & Gamble 39.1 37.5 -1.6 Church & Dwigh
Slide 33: Top Drivers: 2. Build Power Brands
Top Drivers 2. Build Power Brands
Slide 34: Our Power Brands Are Market Leaders
A&H brands are in 86% of households in America #1 Condom Brand #1 Laundry Additive Brand #1 Battery Powered Toothbrush Brand #1 Pregnancy Kit Brand #1 Depilatory Brand #1 Oral Care Pain Relief Brand #1 Extreme Value Laundry Detergent Arm & Hammer Trojan OxiClean Spinbrush First Response Nair Orajel
Slide 35: How ARM & HAMMER Became a $1 Billion Power Brand
How ARM & HAMMER Became a $1 Billion Power Brand
Slide 36: Unique Brand Spanning Premium and Value Segments
Value Premium Oral Care Baking Goods Pet Care Fabric Care Carpet Care Anti-perspirant/ Deodorant Unique Brand That Spans Both Premium and Value Segments
Slide 37: Found in More Aisles and Categories Than Any Other Brand
Found in More Aisles and Categories Than Any Other Brand
Slide 38: Prior to 2005, A&H Brand Was Hardly Growing
Different Packaging Look Across Categories Minimal Product Innovation Little Marketing Support Net: Less Than 1% Organic Growth However, Prior to 2005, A&H Brand was Hardly Growing, Very Boring, and Very Dysfunctional
Slide 39: We Unified Packaging to Build Stronger Brand Presence
THEN First, We Unified Packaging to Build Stronger Brand Presence at Retail NOW
Slide 40: Continuous Stream of Category Leading Innovation
Then, We Created a Continuous Stream of Category Leading Innovation
Slide 41: Integrated A&H Marketing Campaign
Public Relations Synchronized In-Store Campaign Trusted Solutions that Meet Today’s Home & Personal Care Needs Synchronized Print Campaign Digital Consumer Engagement Synchronized Packaging Synchronized TV & Radio Campaign Then We Launched Integrated A&H Marketing Campaign
Slide 42: Doubled Marketing Spending Beyond Tide and Colgate
Source: Kanta Media: Top 100 CPG Advertisers Jan. – Sept. 2011 And Doubled the Marketing Spending to be More Than Major Brands Like Tide and Colgate
Slide 43: Turnaround Drove Increase in A&H Organic Growth
Turnaround Effort Drove Significant Increase in A&H Organic Growth
Slide 44: A&H Masterbrand Outpaces Category Growth
-0.9% 1.4% 1.7% Retail Growth Comparison A&H vs. Like Categories Source: AC Nielsen Red Green Report, AOC, CY 2010, CY 2011, and YTD 2012 2012YTD 7% 8.3% 14% A&H Retail Sales Growth Category Growth Now the A&H Masterbrand Significantly Outpaces Category Growth (AOC)
Slide 45: Passed $1 Billion in Sales Starting in 2010
Passed $1 Billion in Sales Starting in 2010!
Slide 46: Leveraging Rejuvenated Brand for Recent Acquisitions
Acquisition New Branding Crest Spinbrush A&H Spinbrush Simply Saline A&H Simply Saline Leveraging Rejuvenated Brand to Accelerate Growth of Recent Acquisitions
Slide 47: Licensing Into New Categories
Licensed Products Generated in Excess of $185MM in Retail Sales Over 400 Licensed Products Prominently Feature the Arm & Hammer Logo Across 10 Additional Store Aisles Including: Arm & Hammer Vacuum Bags And Filters - #1 Selling Bags and Filters Arm & Hammer Diaper Pails – Fastest Growing Brand in th
Slide 48: Same Brand Building Strategy Applied to All 8 Power Brands
Improved Packaging to Build Stronger Brand Presence at Retail Robust Pipeline of Innovative Products Improved Marketing Campaigns Same Brand Building Strategy Applied to All 8 Power Brands
Slide 49: Robust Pipeline of New Products
Created New Product Development Team in 2006 New Products Delivered 80+% of – Organic Revenue Growth* Fewer, Bigger, Better New Product Strategy Going Forward * Consumer Domestic Organic Revenue Growth Robust Pipeline of New Products
Slide 50: 2012 New Products
2012 New Products: Building on Current Platforms & Innovating in New Platforms
Slide 51: New ARM & HAMMER Laundry Detergents
2011 2012 Only Scented Detergent Clinically Tested Safe for Sensitive Skin Propelled A&H Sensitive Platform (+27%) to 21% Of A&H LLD Expansion Into New Convenient Unit Dose Form With Concentrated Micro Crystals for Deep Cleaning New ARM & HAMMER Laundry Detergents
Slide 52: New ARM & HAMMER Cat Litters
2011 2012 Works Even When You Can't Scoop – Every Granule is Coated With Baking Soda for Long Lasting Freshness Large-size Offering Builds on Most Successful Litter Category Launch in Past 5 Years New ARM & HAMMER Cat Litters
Slide 53: New ARM & HAMMER Tooth Tunes
2012 Proprietary Technology Delivers Best Music Sound While Brushing Plays 2 Minutes of Top Rated Music to Encourage Kids Longer Brushing Broad Range of Artists And Genre — Trade-up Within Manual Brush Launch: July 1, 2012 New ARM & HAMMER Tooth Tunes
Slide 54: New OxiClean Dishwashing Booster
2012 New Consumer Unmet Need in Auto Dish Additive Category Noticeable Increase in Cloudy Film And Food Particles On Glasses and Dishes Boosts The Cleaning Power of Today’s Detergents For Crystal Clear Dishware New OxiClean Dishwashing Booster
Slide 55: CHD Power Brands Beat Category Growth 22 Out of 28 Times
Source: Nielsen All Outlet YE 2007, 2008, 2009, 2010, 2011 - *FDMx CHD Power Brands Beat Category Growth 22 Out of 28 Times From 2007 -
Slide 56: Top Drivers: 3. Ferociously Defend Our Brands
Top Drivers 3. Ferociously Defend Our Brands
Slide 57: Ferociously Defend Our Brands
Ferociously Defend Our Brands
Slide 58: OxiClean Stain Fighters Share
27.0% 38.0% Nielsen FDMxWM, Dollar Share of Stain Fighters In 3 ½ Years, CHD Increased OxiClean’s Market Leadership to 38% Stain Fighters Share
Slide 59: We Did This Through Innovation
2008 Premium Pretreat Line Extension “The Best In Stain Removal” 2009 Increased Liquid Support “Cleaner, Whiter, Brighter”” 2009-10 Versatility Emphasis “Gets Tough Stains Out All Around The Home” 2007 Increased Pretreat Support “See It Work Before Your Eyes” We Did This Through Innovation New Forms
Slide 60: Increased Marketing Spending 400%
60 100 500 Source: First Response Actual Yearly Marketing Spending Annual Marketing Index …And Increased Marketing Spending 400%
Slide 61: #1 Laundry Brand Entered the Category
In Mid-2009, the #1 Laundry Brand Entered the Category
Slide 62: Defended OxiClean With Innovative New Products
CHD Ferociously Defended OxiClean With Innovative New Products
Slide 63: Co-Branded OxiClean Launches
Branded Launches Co-Branded Launches We Also Co-Branded OxiClean With Other Leading CHD Brands to Drive Higher Brand Awareness
Slide 64: OxiClean #2 Most Advertised Brand in Fabric Care
Fabric Care Reported Media Spending, September 2010 – August 2011. Tide = 100 Index We Increased Ad Spending to Make OxiClean the #2 Most Advertised Brand in Fabric Care
Slide 65: OxiClean Deflected the Attack
Change OxiClean 39.9 40.6 +0.7 P&G 10.4 14.1 Reckitt 12.0 10.1 -4.9 SC Johnson 17.8 20.3 +2.5 Market Share Source: Market Share Is Nielsen 52-Week 06/29/12 All-outlet OxiClean Totally Deflected the Attack; Still #1 – 2x the Closest Competitor +3.7
Slide 66: Total OxiClean Franchise Sales Over $500MM
Source: Nielsen Channel Views, Total U.S. *Co-Branded : A&H Plus OxiClean includes Detergent and Carpet Total OxiClean Franchise Sales Now Represent ›$500MM for CHD, up 3x in Five Years !
Slide 67: Top Drivers: 4. Driving International Growth
4. Driving International Growth Top Drivers
Slide 68: CHD Geographic Mix Transformation 2001–2011
CHD Has Transformed From Almost Totally a U.S. Business to More of a Global Player. INTERNATIONAL - 2% INTERNATIONAL - 19% CHD 2001 – 2011 Geographic Mix Transformation
Slide 69: International Net Revenues in 2011
International Net Revenues in 2011 Were $495 Million With 96% in 6 Countries
Slide 70: 2011 Was a Stellar Year for International
2011 vs. Organic Sales +4% Gross Profit +13% Operating Profit +24% 2011 Was a Stellar Year for International
Slide 71: Five Stellar Years of Strong Growth
2006 vs. 2011 CAGR Net Sales +7% Gross Profit +7% Operating Profit +12% Capping 5 Stellar Years of Strong Growth
Slide 72: Subsidiary Net Sales Growth Records
2006 vs. 2011 CAGR Australia +13% Canada +9% Brazil +9% England +6% Mexico +4% France +1% 5 Out of 6 Subsidiaries Have Good Long-Term Net Sales Growth Records
Slide 73: Continued Growth in 1H 2012
H1 2012 vs. H1 2011 Net Sales +5% Gross Profit +1% Operating Profit +12% Continued Growth in 1H of 2012 Despite Weakening Western Europe Economy
Slide 74: International Power Brands
Leading Cosmetic Tooth Whitening Product in Europe/Australia #2 Topical Analgestic in Canada Sea Water Based Nasal Hygiene Spray Sold in 84 Countries #1 Nausea Relief in Canada International Power Brands Nielsen 4 Week Ending January 14, 2012 Growth Driven by Both Corporate and International Power B
Slide 75: Key Drivers of International Growth
1. Expanding Corporate Power Brands • Canada: A&H Laundry Detergent, Cat Litter & Toothtunes • Mexico: A&H Laundry Detergent • UK: A&H Toothpaste & Toothtunes • Australia: A&H Toothpaste, Baking Soda & Spinbrush • France: A&H Spinbrush 2. Building Scale Through Acquisitions • UK Batiste Dry Shampoo
Slide 76: Top Drivers: 5. Expanding Gross Margin
5. Expanding Gross Margin 5. Expanding Gross Margin Top Drivers
Slide 77: CHD 2001–2011 Gross Margin
30.0% 29.1% 36.7% 39.1% 40.5% 44.7% 44.8% 44.2% CHD 2001 – 2011 Gross Margin Expanded 1,510 bps
Slide 78: Greater Gross Margin Growth Than Key Competitors
While CHD Gross Margin Has Not Increased in Past 2 Years, CHD Has Delivered Greater Gross Margin Growth Over Past 3 Years Than Key Competitors Gross Margin Change
Slide 79: Key Gross Margin Growth Drivers
Good to Great Cost Optimization Program Supply Chain Restructuring Acquisition Synergies Price/Mix Reformulation Reduce Packaging Laundry Compaction Hedges New Laundry Plants Acquire Higher Margin Brands Implement Cost Synergies Launch Higher Margin New Products Actions Examples Key Gross Margin Gro
Slide 80: Gross Margin 1H 2012 and 2H Improvement
100 bps Gross Margin Contraction In 1H Of 2012 Driven by Unfavorable Mix and New California Plant Start-up Cost 2H 2012 Gross Margin Improvement Driven by Six Completed Initiatives: 1. Lower Logistics Costs From New California Plant 2. In-house Production of Unit Dose Laundry Detergent 3. Launching
Slide 81: Victorville, California Plant
Victorville, California New Laundry & Cat Litter Plant Started Up in Q2 2012
Slide 82: Top Drivers: 6. Superior Overhead Management
Top Drivers 6. Superior Overhead Management
Slide 83: Revenues Up 59% Since 2004, Headcount Down 8%
2004 2011 Revenues Have Increased 59% Since 2004, Headcount Has Declined 8% Revenue $1.7B $2.7B 59% # Employees 3,800 3,500 -8% EPS $0.68 $2.21 +225%
Slide 84: Highest Revenue Per Employee of Major CPG
Numbers Taken From Last Annual Report For Each Company. Resulting in Highest Revenue Per Employee of Any Major CPG Company
Slide 85: Management Team Walks the Walk on Overhead
Management Team “Walks the Walk” on Tight Overhead Controls
Slide 86: My Airfare to Boston Cost $49!
My Airfare to Boston Cost $49!
Slide 87: Top Drivers: 7. Expert Management Team
Top Drivers 7. Expert Management Team
Slide 88: Tenure and Experience of SBU Leaders
The Average Tenure of Our 7 Strategic Business Unit Leaders (SBUs) in The Current Role is 5 Years. The Average Experience of Our SBU Leaders in the CPG Industry is 23 Years. We Believe in Leadership Expertise and Longevity Versus Cross-Functional Experiences and Management Turnover
Slide 89: Management Expertise Pays Off
8 Power Brands Exceeded Category Growth Rate 30 Out of 40 Times in Last 5 Years Able to Reduce Headcount Outstanding Execution Across All Functions Able to Absorb Acquisitions With Minimal Additional Headcount Source: Nielsen All-Outlet 2007-2011 “Management Expertise” Pays Off
Slide 90: Top Drivers: 8. Proven Track Record on Acquisitions
Top Drivers 8. Proven Track Record on Acquisitions
Slide 91: Strict Acquisition Guidelines
Primarily #1 or #2 Share Brands Higher Growth, Higher Margin Brands Asset Light Leverage CHD Capital Base in Manufacturing, Logistics and Purchasing Deliver Sustainable Competitive Advantage We Have Strict Acquisition Guidelines to Ensure Accretive Acquisitions
Slide 92: Revenue Development Past 12 Years
SPINBRUSH UNILEVER ORAL CARE SIMPLY SALINE USA DETERGENTS FELINE PINE AVID BATISTE CHURCH & DWIGHT REVENUE DEVELOPMENT – PAST 12 YEARS CARTER- WALLACE ARMKEL JV (50%) ORANGE GLO ORAJEL $691 $960 $1,047 $1,057 $1,462 $1,737 $1,946 $2,221 $2,404 $2,521 $2,589 $2,749 Proven Track Record on Acquisitions
Slide 93: 7 of 8 Power Brands Acquired Since 2000
YEAR ACQUIRED Arm & Hammer $1 Billion Brand --- Trojan #1 Condom Brand XTRA #1 Extremely Value Laundry Detergent First Response #1 Pregnancy Kit Brand Nair #1 Depilatory Brand Spinbrush #1 Battery Powered Toothbrush Brand OxiClean #1 Laundry Additive Brand Orajel #1 Oral Care Pain Relief Brand 7 of
Slide 94: Recent Bolt-on Acquisitions 2010/2011
Simply Saline Feline Pine Batiste Year Sales $20M $20M $20M GM% Accretive Yes Yes Yes Category Nasal Hygiene Cat Litter Hair Care Market Position #1 #1 #1 Asset Light Yes Yes Yes Recent Bolt-on Acquisitions – 2010/2011
Slide 95: New Power Brands
2 New Power Brands We Plan to Build Lil’ Critters and Vitafusion Into 2 More Power Brands In CHD’s Portfolio
Slide 96: We Integrate Acquisitions Quickly
Nielsen FDMx 52 Week Dollar Share for 2005 and Later IRI FDMx Prior to 2005 Nair: Depilatories, Wax and Bleach $ Share Brand Position in Category Pre-acquisition Pre-acquisition Trojan 68.9 75.3 #1 #1 First Response 12.0 29.6 #3 #1 Nair 22.8 27.3 #2 #2 Spinbrush 30.1 44.5 #2 #1 OxiClean 26.1 36.6 #1
Slide 97: Top TSR Drivers: 9. Best in Class Free Cash Flow Conversion
Top 10 TSR Drivers 9. “Best in Class” Free Cash Flow Conversion
Slide 98: Cash Flow Increased 381% 2001–2011
160.0% NI 105.9% NI 124.0% NI 118.3% NI 143.9% NI 131.0% NI 136.2% NI * Excludes York Plant and Abbott Settlement 112.4% NI 2001 – 2011 Cash Flow Has Increased 381% to $361MM $MM $361MM $361MM $375MM $339MM $289MM $200MM $152MM $86MM $75MM
Slide 99: Best in Class FCF Conversion
Source: UBS 5 Year Average 2007 - “Best in Class” FCF Conversion
Slide 100: Top TSR Drivers: 10. TSR Junkies
Top 10 TSR Drivers 10. TSR Junkies
Slide 101: Decade of Growth Has Transformed CHD
Net Revenues Have More Than Tripled to $2.7 Billion. Gross Margins Have Increased 1,510 bps to 44.2% NR. Marketing Spending Has Increased 510 bps to 12.9% NR. SG&A Has Decreased 194 bps to 13.1% NR. Operating Income Has Increased 840 bps to 18% NR. EPS Has Increased 380% From $0.46 to $2.21. Cash Fl
Slide 102: TSR CAGR 18.9%
10 YEAR TSR CAGR 18.9% And Delivered Outstanding Returns to Our Shareholders
Slide 103: Driven by One Great Team of TSR Junkies
Driven by One Great Team of TSR Junkies
Slide 104: CHD Management Team is 100% in the Game
1. Bonuses Tied 100% to Business Results: – 25% Net Revenue – 25% Gross Margin Expansion – 25% Adjusted EPS – 25% Free Cash Flow 2. Equity Compensation is 100% Stock Options 3. Required to be Heavily Invested in Company Stock CHD Management Team is 100% in the Game
Slide 105: Top 10 TSR Drivers Summary
1. Recession Resistant Product Portfolio 2. Build Power Brands 3. Ferociously Defend Our Brands 4. Driving International Growth 5. Expanding Gross Margin 6. Superior Overhead Management 7. Expert management Team 8. Proven Track Record on Acquisitions 9. “Best in Class” Free Cash Flow Conversion 10.
Slide 106: Agenda
Agenda 1. Opening Remarks Jim Craigie 2. New Acquisition Jim Craigie 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell
Slide 107: First Half 2012 Highlights
Net Sales $1,317.2 $1387.0 3.2% Organic Growth 2.3% 6.0% Gross Margin 44.7% 43.7% -100 bps Mktg. % of Sales 11.9% 11.3% -60 bps SG&A as % of Sales 13.9% 13.3% -60 bps Operating Margin 18.9% 19.1% +20 bps Effective Tax Rate 33.7% 34.3% EPS $1.14 $1.22 +6.7% FCF $148.1 $149.2 +1% ($ in millions) First
Slide 108: 2007 2008 2009 2010 2011 1H2012
2007 2008 2009 2010 2011 1H2012
Slide 109: First Half Volume Up 8.4%, Price/Mix Drag of 2.4%
First Half Volume Up 8.4%, Price/Mix Drag of 2.4% Volume Price/Mix Total Consumer Domestic 11.0% -3.5% 7.5% Consumer International 2.8% -0.9% 1.9% SPD -1.0% 3.1% 2.1% Total Company 8.4% -2.4% 6.0%
Slide 110: Strong Free Cash Flow
$339 $289 $200 FCF Conversion: 118% 143% 136% 131% $361 $148 $149* 112% 89% 2008 2009 2010 2011 1H 2011 1H 2012 $375 85% *Includes $20MM of Capital for Victorville Plant in 2012 Strong Free Cash Flow (ex. New Plant and Abbott Settlement in 2009) (ex. Pension Settlement in 2010) Conversion % = Free C
Slide 111: Billion Dollars From Free Cash Flow Over Next Three Years
Billion Dollars From Free Cash Flow Over the Next Three Years
Slide 112: Prioritized Uses of Free Cash Flow
1. TSR-Accretive M&A 2. New Product Development 3. Capex for Organic Growth & G2G 4. Return of Cash to Shareholders 5. Debt Reduction Prioritized Uses of Free Cash Flow
Slide 113: Dividend Increases Reflect Our Commitment to Shareholders
Dividend Increases Reflect Our Commitment to Our Shareholders
Slide 114: Strong Balance Sheet
Total Debt / Bank EBITDA Target Leverage Range of 2-3x *2012 Q2 End, Excludes Acquisition ** 2012 LE With Avid Acquisition Strong Balance Sheet
Slide 115: Significant Financial Capacity
$ MM Dec 31, Dec 31, Dec 31, July 1, Cash $447 $189 $251 $184 Credit Lines “Dry Powder” $627 $720 $751 $654 Credit Rating BB+ BBB- BBB BBB Positive Outlook Significant Financial Capacity
Slide 116: Agenda
2. New Acquisition Jim Craigie 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell Agenda 1. Opening Remarks Jim Craigie
Slide 117: 2012 Adjusted EPS Growth +10%
+16% +22% +12% + 9-10% +14% *Represents Outlook as of August 7, 2012, Excludes Avid Health Acquisition $1.43 $1.74 $1.98 $2.21 $2.41 - $2.43* 2012 Adjusted EPS Growth +10%
Slide 118: 2012 August 7 Guidance Recap
August 7 Guidance Organic Sales +3-4% (Upper End) Gross Margin +25-50 bps (Lower End) Marketing ~ 13% of Sales Adjusted EPS $2.41 - $2.43 (+9-10%) (Excluding Avid Acquisition) *Represents Outlook as of August 7, 2012, Excludes Avid Health Acquisition 2012 August 7 Guidance Recap
Slide 119: Headed for 10 for 20
Headed for “10 for 20” Club: Still Time to Get on Board Only MAJOR CPG Company With 11 Straight Years of 10%+ EPS Growth Goal of 20 Straight Years of 10% EPS Growth
Slide 120: Agenda
1. Opening Remarks Jim Craigie 2. New Acquisition Jim Craigie 3. Top 10 TSR Drivers Jim Craigie 4. 2012 First Half Results Matt Farrell 5. 2012 Outlook Matt Farrell 6. Q&A Jim Craigie/Matt Farrell Agenda
Slide 121: Thank You
THANK YOU