Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — CAGNY 2020
150 slides from Church & Dwight's conference presentation, Feb 20, 2020
Slide 1: CAGNY 2020
CAGNY 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: 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 Business Strong 2020 Outlook Becoming More Balanced 3
Slide 4: 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% 4
Slide 5: Who We Are
01 Who We Are Matt Farrell, Chairman and Chief Executive Officer
Slide 6: We Have an Evergreen Business Model
WE HAVE AN EVERGREEN BUSINESS MODEL 3% Organic Sales Growth 8% EPS Growth 6
Slide 7: Organic Sales Growth for the Last 10 Years
ORGANIC SALES GROWTH FOR THE LAST 10 YEARS 6.0% 3.6% 10-year organic sales average 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 7
Slide 8: Organic Sales – Sources
ORGANIC SALES – SOURCES 2% United States 3% 6% International 5% Specialty Products 8
Slide 9: Power Brands
Naix POWER BRANDS Batiste waterpik FiAWiesse
Slide 10: Brands Drive Our Results
12 BRANDS DRIVE OUR RESULTS more than 80% of sales & profits are represented by these 12 POWER BRANDS 10
Slide 11: Our Portfolio Is Balanced & Diversified
OUR PORTFOLIO IS BALANCED & DIVERSIFIED A WELL-BALANCED PORTFOLIO OF HOUSEHOLD & PERSONAL CARE PRODUCTS Household: 44% Specialty Products: Personal Care: 7% 49% 11
Slide 12: Both Premium and Value Products
BOTH PREMIUM AND VALUE PRODUCTS Premium: 63% Value: 37% 12
Slide 13: Long International Runway
LONG INTERNATIONAL RUNWAY U.S. Consumer International Consumer 76% 17% Specialty Products 7%
Slide 14: 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) 14
Slide 15: Our Advantage: Nimble Organizational Structure
OUR ADVANTAGE: NIMBLE ORGANIZATIONAL STRUCTURE quick decision easy ability to adapt making communication 15
Slide 16: 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. 16
Slide 17: 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 17
Slide 18: 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 19: 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. 19
Slide 20: Why We Are Winning
02 Why We Are Winning
Slide 21: 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. 21
Slide 22: 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 23: We Know How to Grow Share
WE KNOW HOW TO GROW SHARE 2016 2017 2018 2019 10 out of 12 power brands grew or maintained share in 2019 Source: Nielsen Total U.S. AOC 23
Slide 24: 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 24
Slide 25: 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 25
Slide 26: 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 GUM MY 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
Slide 27: We Are Growing Online
WE ARE GROWING ONLINE Percentage of Net Sales >9% 8% 7% 5% 2% 1% 2015 2016 2017 2018 2019 2020E 27
Slide 28: We Have #1 Products on Amazon
WE HAVE #1 PRODUCTS ON AMAZON Source: 3rd party data 28
Slide 29: Our Products Are On-Trend
03 Our Products Are On-Trend
Slide 30: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Removal Water Flossers SELF-CARE Gummy Vitamins Hair Thinning Solutions 30
Slide 31: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Removal Water Flossers SELF-CARE Gummy Vitamins Hair Thinning Solutions 31
Slide 32: #1 Dry Shampoo in the World
7M 1 dry shampoo in the world ary 32
Slide 33: 66% of Women Don't Wash Their Hair Daily
66% of women don’t wash their hair daily. 13% of women 18+ use dry shampoo. Source: MRI Doublebase 2016*, ^Mintel 2017, ~Lightspeed GMI/Mintel January 2016 33
Slide 34: Growth Driver: Increasing Household Penetration in U.S.
GROWTH DRIVER: INCREASING HOUSEHOLD PENETRATION IN U.S. 7.5% Dry Shampoo 34
Slide 35: 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 12/28/19 35
Slide 36: Batiste Waterless Cleansing Foam
BATISTE waterless cleansing foam for drier hair with instant hair refresh. 74% of women have normal to dry hair. strengthen hydrate shine smooth 36
Slide 37: Ready, Set, Foam!
“Ready, set, FOAM!”
Slide 38: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Removal Water Flossers SELF-CARE Gummy Vitamins Hair Thinning Solutions 38
Slide 39: #1 Women's Electric Hair Remover
#1 women’s electric hair remover 39
Slide 40: US Women Have Less Time for Grooming
US women have less time to take care of grooming needs. Source: 2018 American Time Use Survey 40
Slide 41: Growth Driver: Increasing Household Penetration in U.S.
GROWTH DRIVER: INCREASING HOUSEHOLD PENETRATION IN U.S. 2% Electric Hair Removal 41
Slide 42: Growth Driver: International Expansion
GROWTH DRIVER: INTERNATIONAL EXPANSION <2% Electric Hair Removal: Rest of World 42
Slide 43: Flawless Nu Razor
FLAWLESS Nu Razor The waterless whole-body hair removal for women. Anywhere, anytime. 43
Slide 44: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Removal Water Flossers SELF-CARE Gummy Vitamins Hair Thinning Solutions 44
Slide 45: #1 Power Flosser Recommended by the ADA
#1 power flosser and recommended by the American Dental Association 45
Slide 46: Waterpik Is 2x More Effective Than String Flossing
Brushing and flossing with Waterpik is 2x more effective than brushing and string flossing. Source: Academic Center for Dentistry, Amsterdam 46
Slide 47: Growth Driver: Increasing Household Penetration in U.S.
GROWTH DRIVER: INCREASING HOUSEHOLD PENETRATION IN U.S. 48% 22% Electric Water Toothbrush Flossers 47
Slide 48: Growth Driver: International Expansion
GROWTH DRIVER: INTERNATIONAL EXPANSION 48% 22% 3-5% Electric Toothbrush: Water Flossers: Water Flossers: U.S. U.S. Europe 48
Slide 49: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Removal Water Flossers SELF-CARE Gummy Vitamins Hair Thinning Solutions 49
Slide 50: #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 51: Gummy Form Is More Appealing Than Pills
Gummy form is more appealing than pills and capsules. 51
Slide 52: Adult VMS Gummy Form Increased from 3% to 18%
Adult VMS gummy form has increased from 3% to18% since 2012. Source: Nielsen 12/28/19 52
Slide 53: Vitafusion Line Extensions
VITAFUSION LINE EXTENSIONS ADDRESSING EVEN MORE NEED STATES 17 new items 22 new items 5 new items 7 new items 53
Slide 54: Our Products Are On-Trend
OUR PRODUCTS ARE ON-TREND Dry Shampoo CONVENIENCE Waterless Hair Remover Water Flossers Gummy Vitamins SELF-CARE Hair Thinning Solutions 54
Slide 55: #1 Hair Fiber #1 Hair Thinning Supplement
#1 Hair Fiber #1 Hair Thinning Supplement Source: Nielsen 12/28/19 55
Slide 56: 40% of Men & Women Have Noticeable Hair Loss by 40
40% of men & women have noticeable hair loss by age 40. 56
Slide 57: Toppik Hair Fibers
TOPPIK HAIR FIBERS INSTANT SOLUTION FOR FINE OR THINNING HAIR 57
Slide 58: Reclaim the Hair That Makes You Fully You
“Reclaim the hair that makes YOU fully YOU.”
Slide 59: Master Brand Update
03 Master Brand Update MORE POWER TO YOU
Slide 60: A Billion Dollar Brand
a BILLION dollar brand. 60
Slide 61: ST PT PPPS ENYE AT al,
| i ST PT PPPS ENYE AT 7 al,
Slide 62: The New Campaign Is Working
THE NEW CAMPAIGN IS WORKING 2.6 million more households are buying ARM & HAMMER products, an increase of 3%. Source: 2018 – 2019 Numerator Panel 62
Slide 63: 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. 63
Slide 64: The Oldest Brand Showing Up in One of the Newest Ways
THE OLDEST BRAND SHOWING UP IN ONE OF THE NEWEST WAYS.
Slide 65: Removes Up to 5x More Plaque
“Removes up to 5x more plaque.”
Slide 66: ARM & HAMMER Clean & Simple
ARM & HAMMER Clean & Simple CLEAN. SIMPLE. SMART. POWERFUL.
Slide 67: 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” 67
Slide 68: Clean & Simple Ingredients
hard working cleaner active stain remover laundry booster baking soda water softener essential fragrance ingredients plus water 68
Slide 69: 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 30 to ingredients 69
Slide 70: Clean & Simple Ingredients
Clean&Simple” Ingredients 75 Loads per bottle 131 FLOZ Hard-Working Cleaner, Active Stain Remover, Laundry Booster, Pure Baking Soda, Water Softener, Gentle Fragrance, =) POWER and water for d YZ To You Tepe MORE New Clean & Simpk GS) hemicals, dyes, or preservative
Slide 71: No Others Provide a No-Compromise Powerful Clean
NO OTHERS PROVIDE A NO-COMPROMISE POWERFUL CLEAN WITH A SIMPLE INGREDIENT LIST NATURAL SENSITIVE REGULAR 71
Slide 72: Fewer Ingredients But No Compromise
Fewer Ingredients But No Compromise Clean & Simple™ Plus OxiClean™ AS POWERFUL AS *And Water
Slide 73: Our Promise to You and the Planet
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 74: Church & Dwight Science-Based Innovation
CHURCH & DWIGHT SCIENCE-BASED INNOVATION Innovation Risk-taking Speed Culture Archana Gupta, Church & Dwight Research & Development
Slide 75: Did We Just Hack Laundry?
“Did we just hack laundry? Yeah we did!”
Slide 76: International Story
04 International Story
Slide 77: International Evergreen Target: 6%
INTERNATIONAL EVERGREEN TARGET: 6% 2% United States 3% 6% International 5% Specialty Products 77
Slide 78: International Net Sales: Achieving Global Scale
INTERNATIONAL NET SALES: ACHIEVING GLOBAL SCALE ~$756 MM 81% ~$535 MM United States 2014 2019 78
Slide 79: 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 79
Slide 80: International Business Is Growing Organically
INTERNATIONAL BUSINESS IS GROWING ORGANICALLY 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 comparable GAAP measure. 80
Slide 81: International Net Sales Composition
INTERNATIONAL NET SALES COMPOSITION Europe Mexico 22% 8% Canada Australia 30% 7% Global 81% Markets United States Group 33% 81
Slide 82: Global Market Group Net Sales 2014 to 2019
GLOBAL MARKET GROUP NET SALES 2014 TO 2019 2014 2015 2016 2017 2018 2019 82
Slide 83: 2019 International Organic Growth Is Broad
2019 INTERNATIONAL ORGANIC GROWTH IS BROAD Subsidiaries: +5.2% Global Markets Group*: +19.2% *Exports business to 130 countries 83
Slide 84: Building Global Capabilities
BUILDING GLOBAL CAPABILITIES Expanding Resources China SE Asia Germany Central America Investing localizing brands technology training and regulatory support for distributors 84
Slide 85: 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 85
Slide 86: …And Operating Margin Expansion
… 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 86
Slide 87: Animal Productivity Story
05 Animal Productivity Story
Slide 88: Specialty Products Evergreen Target: 5%
SPECIALTY PRODUCTS EVERGREEN TARGET: 5% 2% United States 3% 6% International 5% Specialty Products 88
Slide 89: SPD Organic Revenue History
SPD ORGANIC REVENUE HISTORY Organic Sales 30% 22.6% 20% 11.5% 10% 6.0% 3.0% 0% -10% 2011 2014 2017 2020E
Slide 90: Cyclical Dairy Industry Drives SPD Organic Revenue
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 USDA 2020
Slide 91: Global Population Growth Drives Demand for Protein
GLOBAL POPULATION GROWTH DRIVES DEMAND FOR PROTEIN World Population (Billion) 9.8 7.7 2019 2050E Source: World Wild Life Fund and the Global Footprint Network 91
Slide 92: Antibiotics Are Out of Favor
ANTIBIOTICS ARE OUT OF FAVOR Consumers Retailers Farmers • no antibiotics ever • no added hormones • no chemicals added 92
Slide 93: 40% Decrease in Animal Antibiotic Use Since 2015
There has been a 40% decrease in the use of animal antibiotics since 2015. Source: US FDA 93
Slide 94: Natural Solutions: Nutritional Supplements
NATURAL SOLUTIONS NUTRITIONAL SUPPLEMENTS 94
Slide 95: Non-Dairy Created a More Balanced Business
NON-DAIRY CREATED A MORE BALANCED BUSINESS… % Of Non-dairy Sales 27% <1.0% 2015 2019 95
Slide 96: Cheese Consumption Increase Offsets Fluid Milk Decline
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 97: Positioned for 5% Organic Growth
POSITIONED FOR 5% ORGANIC GROWTH • Trusted brand • Aligned with consumers trend • Multiple species • Global growth 97
Slide 98: How We Run the Company
06 How We Run the Company
Slide 99: We Have Five Operating Principles
WE HAVE FIVE OPERATING PRINCIPLES 1 Brands Leverage Brands Consumers Love Brands Consumers Love 2 Friend of the Environment 3 Highly productive people in a Leverage People place where people matter 4 Leverage Assets Asset Light 5 Leverage Acquisitions GOOD shareholder returns become GREAT shareholde
Slide 100: Brands Consumers Love
BRANDS CONSUMERS LOVE Brands Consumers Love 100
Slide 101: Friend of the Environment
FRIEND OF THE ENVIRONMENT 83% of consumers are mainstream or extreme green. Source: Nielsen Total U.S. AOC 101
Slide 102: Friend of the Environment: Then
FRIEND OF THE ENVIRONMENT: THEN Company institutes the use of recycled paperboard to package household products. Company introduces Sole sponsor of first pro-environmental Earth Day. wall charts & trading cards as product Launches first non- promotion. polluting, phosphate- free laundry detergent. 1
Slide 103: Friend of the Environment: Now
FRIEND OF THE ENVIRONMENT: NOW Approximately 5 million trees were planted last year by Church & Dwight through the Arbor Day Foundation. 50% of global 100% of global electricity demand electricity demand supplied by supplied by renewable energy renewable energy sources. sources. 103
Slide 104: Water
WATER GOAL: To reduce water and/or wastewater by 25% by 2022 using 2016 as a baseline. 104
Slide 105: Solid Waste
SOLID WASTE GOAL: To increase solid waste recycling to 75% by the end of 2020. 105
Slide 106: Air
AIR GOAL: To achieve 100% carbon neutral status for all global operations by end of 2025. 106
Slide 107: ESG Recognition
ESG RECOGNITION 2020 NATIONAL TOP 100 107
Slide 108: 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 $705K $700K $700 $600 $500 $451K $450K $377K $357K $400 $340K $300 $225K $200 $100 $0 CHD CLOROX PG COLGATE KIMBERLY RECKITT EDGEWELL ENERGIZER NEWELL Source: Most recent 10K filings 108
Slide 109: 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 109
Slide 110: 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 . 110
Slide 111: Key Gross Margin Growth Drivers
KEY GROSS MARGIN GROWTH DRIVERS Good to Supply Great Cost Chain Optimization Optimization Acquisition New Synergies Products 111
Slide 112: Financials
07 Financials Rick Dierker Chief Financial Officer
Slide 113: We Have an Evergreen Business Model
WE HAVE AN EVERGREEN BUSINESS MODEL 3% Organic Sales Growth 8% EPS Growth 113
Slide 114: 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% 114
Slide 115: 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 116: 2020 Outlook
2020 Outlook
Slide 117: 2020: 7-9% EPS Growth
2020: 7-9% EPS GROWTH 2020 Outlook Domestic +3% Reported Sales ~6.5% International +7% 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 118: Full Year 2020 Organic Sales Outlook
FULL YEAR 2020 ORGANIC SALES OUTLOOK Organic Sales Growth 4.5% Exit Private Label Vitamins -1.0% Lower Promotions on OxiClean LLD 2020 Net Organic Growth 3.5%
Slide 119: Full Year 2020 EPS Outlook
FULL YEAR 2020 EPS OUTLOOK EPS Evergreen Model 8% Flawless +2% Tariffs -1% Marketing Investments for New Launches -1% EPS Growth Midpoint of 7-9% 8%
Slide 120: Focus on Adjusted Gross Margin
FOCUS ON ADJUSTED GROSS MARGIN 45.7% 45.8% 45.0% 45.1% 44.4% +50 bps to 45.5% 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. 120
Slide 121: 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 121
Slide 122: 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 122
Slide 123: Marketing Spend
MARKETING SPEND 12.2% 12.0% 11.9% 11.7% 11.8% 2016 2017 2018 2019 2020E 123
Slide 124: SG&A Mostly Flat Excluding Amortization
“SG&A” MOSTLY FLAT EXCLUDING 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. 124
Slide 125: 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. 125
Slide 126: 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 126
Slide 127: Long Term FCF Conversion vs. Peers
LONG TERM FCF CONVERSION VS. PEERS Free Cash Flow/Net Income 125% 131% 123% 124% 128% 111% 102% 83% 85% 2015 2016 2017 2018 2019 C&D Peer Avg. Source: Bloomberg 127
Slide 128: 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 128
Slide 129: Strong Balance Sheet
STRONG BALANCE SHEET Total Debt/Bank EBITDA 2.6x 2.2x 1.9x 1.5x ~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. 129
Slide 130: 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 131: 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 131
Slide 132: 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 132
Slide 133: 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 133
Slide 134: High Annual Dividend Growth Rate vs. Peers
HIGH ANNUAL DIVIDEND GROWTH RATE VS. PEERS Average Annual Dividend Growth Rate: 2017, 2018, 2019 10.0% 9.0% 8.0% 8.0% 7.0% 6.0% 5.0% 4.6% 4.0% 3.0% 2.0% 1.0% 0.0% CLOROX CHD UNILEVER ENERGIZER PG RECKITT COLGATE KIMBERLY peer average 134
Slide 135: Q&A
QA
Slide 136: Reconciliations
Reconciliations www.churchdwight.com 136
Slide 137: 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 $20 $40 $17 $78 Adjustment Gross Margin Q2 Q3 Q4 FY 2020 bps impact (30) bps (90) bps (30) bps (40) bps 137
Slide 138: 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 139: 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 140: 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 141: 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 142: 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 143: 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 144: 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 145: 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 146: 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% 146
Slide 147: 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 148: 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 149: 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 150: 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