Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — 2017 CAGNY Conference
145 slides from Church & Dwight's conference presentation, Feb 23, 2017
Slide 1: Church & Dwight 2017 CAGNY Conference
‘oO: CHURCH & DWIGHT CO., INC. ee 2017 CAGNY Conference February 23, 2017
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements, including, among others, statements relating to expected future financial and operating results, net sales and earnings growth; gross margin changes; trade and marketing spending; marketing expense as a percentage of net sa
Slide 3: What You Are Going to Hear Today
What You Are Going to Hear Today 1. Excellent 2016 Results • Delivered 9.3% adjusted EPS growth despite currency headwinds • Achieved 3.2% organic growth • Expanded operating margin (as adjusted) 80 bps to 20.9% 2. “Playing to Win” in 2017 with aggressive but achievable plan • Strong new product pip
Slide 4: Who We Are, Category Trends, How We Deliver, How We Run the Company, Financials
01. 02. 03. WHO WE ARE CATEGORY HOW WE TRENDS DELIVER 04. 05. HOW WE RUN FINANCIALS THE COMPANY 4
Slide 5: Who We Are
01. WHO WE ARE 5
Slide 6: Started with Arm & Hammer Baking Soda
Started with Arm & Hammer Baking Soda 6
Slide 7: $3.5 Billion Diversified CPG Company
$3.5 Billion Diversified CPG Company 7
Slide 8: 10 Power Brands
10 Power Brands vitafusion”
Slide 9: These Brands Drive Our Results
These 10 Brands Drive Our Results 80% of sales and profits are represented by these 10 power brands. 9
Slide 10: We Are a Serial Acquirer
We Are a Serial Acquirer Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2005 #1 Extreme Value Laundry #1 Battery Powered #1 Condom Detergent #1 Pregnancy Kit #1 Depilatory Toothbrush Acquired 2006 Acquired 2008 Acquired 2011 Acquired 2012 #1 Laundry #1 Oral Care #1 Adult & Kids Add
Slide 11: Long History of Growth Through Acquisitions
Long History of Growth Through Acquisitions Net sales in billions $3.5 $1.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 11
Slide 12: We Have Clear Acquisition Criteria
We Have Clear Acquisition Criteria Primarily #1 Higher growth, Asset Light Leverage CHD Deliver or #2 share higher margin capital base in sustainable brands brands manufacturing, competitive logistics and advantage purchasing 12
Slide 13: Church & Dwight Is An Acquisition Platform
Church & Dwight Is An Acquisition Platform Revenue Growth Operational Efficiencies Excellent Integration Track Record BBB+ Access to Capital 13
Slide 14: We Are Primarily a U.S. Company
We Are Primarily a U.S. Company 80% of Church & Dwight is based in the United States. 14
Slide 15: Our Portfolio Is Balanced
Our Portfolio Is Balanced A Well-balanced Portfolio Of Household And Personal Care. Personal Care 44% Household 48% Specialty Products 8% 15
Slide 16: Deliver Outstanding Returns to Our Shareholders
Deliver Outstanding Returns to Our Shareholders 2,800% 2,450% 2,450% Indexed Total Return 2,100% 1,750% 1,400% 1,050% 700% 562% 350% 325% 0% 1/97 5/00 9/03 1/07 5/10 9/13 1/17 Source: Market data as of 30-Jan-2017. ¹ Peers include Clorox, Colgate, Edgewell Personal Care, Energizer, Kimberly Clark ,
Slide 17: Category Trends
02. CATEGORY TRENDS 17
Slide 18: Unit Dose Driving Laundry Category Growth
Unit Dose Driving Laundry Category Growth
Slide 19: Total Laundry Category Trend
Total Laundry Category Trend 2013 2014 2015 2016 2016 Q1 Q2 Q3 Q4 6.4% 4.0% 3.3% 2.5% 1.6% Total 0.5% Laundry -3.1% -2.9% Source: Nielsen Total U.S. AOC 19
Slide 20: Liquid Laundry Category Trend
Liquid Laundry Category Trend 2013 2014 2015 2016 2016 Q1 Q2 Q3 Q4 5.1% 1.6% 1.7% Liquid 0.7% 0.9% Laundry -1.2% -4.5% -5.5% Source: Nielsen Total U.S. AOC 20
Slide 21: Promotional Environment
Promotional Environment Sold on Deal Q4 16 FY16 Simply Tide 60% 47% Sun 43% 42% Arm & Hammer 33% 36% Source: Nielsen Total U.S. AOC 21
Slide 22: Unit Dose Category Trend
Unit Dose Category Trend 2013 2014 2015 2016 2016 Q1 Q2 Q3 Q4 57.4% 30.6% 32.6% 26.4% 18.9% 21.3% 21.2% 19.2% Unit Dose Source: Nielsen Total U.S. AOC 22
Slide 23: Unit Dose Increases YOY to 16% of Total Laundry Category
Unit Dose Increases YOY to 16% of Total Laundry Category 2015 2016 75% 11% 89% 74% 10% Liquid Powder Liquid Powder All Other 14% 16% Unit Dose Unit Dose Source: Nielsen Total U.S. AOC 23
Slide 24: Church & Dwight Unit Dose Trends
Church & Dwight Unit Dose Trends 2013 2014 2015 2016 35.3% 19.7% -2.4% -29.8% Source: Nielsen Total U.S. AOC 24
Slide 25: Unit Dose Market Share
Unit Dose Market Share Unit Dose Market Share 2015 2016 Δ Procter & Gamble 81.0 80.6 -0.4 3.7 4.0 +0.3 Sun Products 9.3 10.8 +1.5 Henkel 2.8 1.6 -1.2 Source: Nielsen Total U.S. AOC Note: The “change” column may not add due to rounding 25
Slide 26: 2017 Unit Dose Innovation
2017 Unit Dose Innovation OxiClean™ Stain Fighters Fresh Scent Booster Deep Cleaning Liquid Detergent ARM & HAMMER 3-IN-1 Power Paks Baking soda freshness with OxiClean stain fighters. 26
Slide 27: Total Laundry Detergent Market Share
Total Laundry Detergent Market Share Total Laundry Detergent Market Share 2015 2016 Δ Procter & Gamble 60.1 60.2 +0.1 14.4 14.1 -0.3 Sun Products 12.1 11.7 -0.4 Henkel 6.6 7.2 +0.8 Source: Nielsen Total U.S. AOC 27
Slide 28: 2016 Church & Dwight Laundry Share vs. 2015
2016 Church & Dwight Laundry Share vs. 2015 28
Slide 29: Innovation Continues to Drive Cat Litter Growth
Innovation Continues to Drive Cat Litter Growth
Slide 30: Litter Category Continues to Grow
Litter Category Continues to Grow 8.1% 8.1% 6.4% 4.4% Clumping Litter 2013 2014 2015 2016 Source: Nielsen Total U.S. AOC 30
Slide 31: We Have Grown Through Innovation
We Have Grown Through Innovation Driven by Consumer Insights 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Retail Sales Source: Neilson Retail Sales for 2011 – 2016 31
Slide 32: The Consumer Spoke and We Listened
The Consumer Spoke and We Listened “Not satisfied with odor control of my current litter.” Source: Accupoll concept studies 32
Slide 33: The Consumer Spoke and We Listened
The Consumer Spoke and We Listened “I didn’t realize scooping was not enough to control bacterial odors.” Source: Accupoll concept studies 33
Slide 34: The Consumer Spoke and We Listened
The Consumer Spoke and We Listened “Cleaning the litter box is a nightmare.” Source: Accupoll concept studies 34
Slide 35: 2017 Litter Innovation – Slide
2017 Litter Innovation – “Slide” SLIDES right out DOESN’T NO STICK to SCRUBBING pan 35
Slide 36: :30 second and :15 second commercial spots
:30 second and :15 second commercial spots 36
Slide 37: Adult Conversion to Gummies Continues to Drive Category Growth
Adult Conversion to Gummies Continues to Drive Category Growth
Slide 38: Adult Gummy Vitamin Category Continues to Grow
Adult Gummy Vitamin Category Continues to Grow 48.1% 35.1% 24.4% 18.6% Adult Gummy 2013 2014 2015 2016 Source: Nielsen Total U.S. AOC 38
Slide 39: Adult Gummy Form Continues Strong Growth
Adult Gummy Form Continues Strong Growth 2012 2016 97% 89% All Other All Other 3% 11% Gummy Gummy Source: Nielsen Total U.S. AOC 39
Slide 40: Adults Consume a Considerable Amount of Vitamins
Adults Consume a Considerable Amount of Vitamins 68% of U.S. adults take a dietary supplement of those, 3 out of 4 take a multivitamin Source: Nielsen Total U.S. AOC 40
Slide 41: vitafusion is the #1 Adult Gummy Vitamin
vitafusion is the #1 Adult Gummy Vitamin Church & Dwight is number in gummy vitamins 1 Source: Nielsen Total U.S. AOC 41
Slide 42: What Does the Consumer Say?
What Does the Consumer Say? say they need 80% more energy. 6 out of 10 say that energy is necessary for an active lifestyle. The Hartman Group, Health &Wellness 2015 Report. NMI – Opportunity Analysis, 2016. The Futures Company Health & Wellness, Jan 2015. Sterling Rice, On the Future, 2015. Mintel,
Slide 43: 2017 Vitamin Innovation – Energy
2017 Vitamin Innovation – “Energy” supports alertness supports caffeine energy sourced from production green tea 43
Slide 44: The Condom Category is Beginning to Shift to Online
The Condom Category is Beginning to Shift to Online 44
Slide 45: Measured Channel Growth
Measured Channel Growth 2013 2014 2015 2016 Condoms 0.0% -1.4% -1.5% -2.6% Source: Nielsen Total U.S. AOC 45
Slide 46: Online Channel Growth
Online Channel Growth 46
Slide 47: Condoms are Not Just Purchased by Men in Online
Condoms are Not Just Purchased by Men 1 in 3 condom purchases are by women. 47
Slide 48: 2017 TROJAN Innovation – XOXO
2017 TROJAN Innovation – “XOXO” SOFTOUCH THIN ALOE INFUSED lubricant 48
Slide 49: The First Time on Network Television
The First Time on Network Television :30 second commercial spot 49
Slide 50: Dry Shampoo is the Fastest Growing Segment of Haircare
Dry Shampoo is the Fastest Growing Segment of Haircare
Slide 51: U.S. Dry Shampoo Continues Strong Growth
U.S. Dry Shampoo Continues Strong Growth 2012 2016 99% 96% All Other All Other 1% 4% Dry Shampoo Dry Shampoo Source: Nielsen Total U.S. AOC 51
Slide 52: U.S. Dry Shampoo Category Continues to Grow
U.S. Dry Shampoo Category Continues to Grow 2012 2016 $32MM $115MM Source: Nielsen Total U.S. AOC 52
Slide 53: U.S. Dry Shampoo Category Continues to Grow
U.S. Dry Shampoo Category Continues to Grow 53.8% 37.0% 34.4% 28.4% Dry Shampoo 2013 2014 2015 2016 Source: Nielsen Total U.S. AOC 53
Slide 54: Dry Shampoo Growth is Ahead of Us
Dry Shampoo Growth is Ahead of Us #1 Dry Shampoo in the U.S. and the U.K. U.S. Population: 324 million U.K. Population: 65 million Retail Category: $115 million Retail Category: $63 million Source: Nielsen 12/19/16 54
Slide 55: Significant Growth Opportunity in the Dry Shampoo Category
Significant Growth Opportunity in the Dry Shampoo Category 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 2013, ~Lightspeed GMI/Mintel January 2016 55
Slide 56: 2017 Batiste Expanded Offering
2017 Batiste Expanded Offering clean & light vibrant & fruity bare neon Same formulation, but with On-trend fragrance “barely there” fragrance profile bursting with that won’t compete with juicy pomegranate & perfume jasmine 56
Slide 57: How We Deliver
03. HOW WE DELIVER 57
Slide 58: TSR Drivers Deliver Results
TSR Drivers Deliver Results 1. Diversified Product Portfolio 2. Build Power Brand Shares 3. Driving International Growth 4. Focus on Gross Margin 5. Growth Through Acquisitions 6. “Best in Class” Free Cash Flow Conversion 7. Superior Overhead Management 8. Simple Incentive Compensation 58
Slide 59: Diversified Product Portfolio
1 Diversified Product Portfolio 59
Slide 60: Diversified Product Portfolio
Diversified Product Portfolio Our Unique Product Portfolio Has Both Value and Premium Products Premium: 60% Value: 40% 60
Slide 61: Build Power Brand Shares
2 Build Power Brand Shares 61
Slide 62: Build Power Brand Shares
Build Power Brand Shares Consistent Share Growth Formula Innovative Increased Increased Share Growth on New Products Marketing Distribution Power Brands Spending 62
Slide 63: Innovative New Products
Innovative New Products Increased Increased Share Growth on Marketing Distribution Power Brands Innovative Spending New Products 63
Slide 64: 2017 ARM & HAMMER Launch
2017 ARM & HAMMER Launch OXICLEAN 3-IN-1 POWER PAKS 64
Slide 65: 2017 LITTER Launches
2017 LITTER Launches SLIDE Easy Clean-Up Clumping Litter 65
Slide 66: 2017 VITAMIN Launches
2017 VITAMIN Launches VITAFUSION ENERGY L’IL CRITTERS Supports energy productions Twisted Fruits & Fruit ‘n Honey 66
Slide 67: 2017 TROJAN Launches
2017 TROJAN Launches TROJAN CONDOMS TROJAN LUBRICANTS TROJAN VIBRATIONS XOXO Chain Reaction power wand Softouch low odor thin condoms Sensations Keep Changing for Non-Stop Thrills Multi-speed Vibrating Massager 67
Slide 68: 2017 DRY SHAMPOO Launches
2017 DRY SHAMPOO Launches BATISTE bare BATISTE neon Clean & light Vibrant & fruity 68
Slide 69: Innovation Continues with 2017 Launches
Innovation Continues with 2017 Launches 69
Slide 70: Increased Marketing Spending
Increased Marketing Spending Innovative New Increased Share Growth on Products Distribution Power Brands Increased Marketing Spending 70
Slide 71: CHD is 18th Largest U.S. Advertiser
CHD is 18th Largest U.S. Advertiser 12. Glaxo SmithKline 18. Church & Dwight 20. Clorox 22. Kimberly-Clark 23. S.C. Johnson 26. Campbell Soup 29. Colgate-Palmolive Source: Kantar, Oct 15 – Sept 16 71
Slide 72: Marketing % of Net Revenue
Marketing % of Net Revenue Marketing support over recent years has been steady 14% 13% 13% 12% 12% 11% 2013 2014 2015 2016 72
Slide 73: Dollars Continue to Shift to Digital
Dollars Continue to Shift to Digital 2011 2016 TV / Radio / Print: TV / Radio / Print: 72% 87% Digital: 13% Digital: 28% 73
Slide 74: Digital Approach
Digital Approach of U.S. 1/3 households own a cat 74
Slide 75: Digital Approach
Digital Approach Find Them Reach Them Educate Them Engage Them Drive Sales in-store & online 75
Slide 76: Increased Distribution
Increased Distribution Innovative New Increased Share Growth on Products Marketing Spending Power Brands Increased Distribution 76
Slide 77: Sustainable Distribution Gains
Sustainable Distribution Gains Change in Measured Distribution Channels 2013 Index vs. 2016 A&H Liquid Detergent 114 A&H Clumping Litter 140 Trojan Condoms 95 First Response 109 XTRA Liquid Detergent 93 Nair Depilatory/Wax/Bleach 112 Spinbrush Toothbrushes 126 OxiClean Stainfighter 117 Vitamins 134
Slide 78: Share Growth on Power Brands
Share Growth on Power Brands Innovative New Increased Increased Products Marketing Distribution Spending Share Growth on Power Brands 78
Slide 79: Church & Dwight Report Card – Measured Channels Only
Church & Dwight Report Card – “Measured Channels Only” Power Brands have met or exceeded category growth two out of three times over the last seven years. share increase share unchanged share decreased Brand 2010 2011 2012 2013 2014 2015 2016 Source: Nielsen Total U.S. AOC 79
Slide 80: Drive International Growth
3 Drive International Growth 80
Slide 81: Driving International Growth
Driving International Growth denotes regional headquarters 81
Slide 82: International Net Sales Composition
International Net Sales Composition International Net Sales in 2016 Were ~$525 Million With 91%* in 6 Countries France Mexico 13% 10% U.K. 22% Australia 11% 81% United States Canada Other Brazil 32% 9% 3% *Includes exports from these subsidiaries to over 100 countries. 82
Slide 83: Excellent Long-Term Growth Record
Excellent Long-Term Growth Record 2011 vs. 2016 CAGR Mexico +13.0% U.K. +11.3% France +1.3% Australia +6.4% Canada +4.3% Brazil +4.1% International Consumer 2011 vs. 2016 CAGR: 7.3% 83
Slide 84: Focus on Gross Margin
4 Focus on Gross Margin 84
Slide 85: Focus on Gross Margin
Focus on Gross Margin 45.7% 45.0% 44.5% 44.2% 44.1% 2012 2013 2014 2015 2016 85
Slide 86: Key Gross Margin Growth Drivers
Key Gross Margin Growth Drivers Good to Supply Great Cost Chain Optimization Optimization Acquisition New Synergies Products 86
Slide 87: All CHD Employees Focus on Gross Margin
All CHD Employees Focus on Gross Margin GROSS MARGIN IS 25% OF ALL EMPLOYEES’ ANNUAL BONUS. 87
Slide 88: Growth Through Acquisitions
5 Growth Through Acquisitions 88
Slide 89: Growth Through Acquisitions
Growth Through Acquisitions 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 89
Slide 90: Long History of Growth Through Acquisitions
Long History of Growth Through Acquisitions Net sales in billions $3.5 $1.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 90
Slide 91: Church & Dwight – Acquisition Platform
Church & Dwight – Acquisition Platform Marketing expertise Revenue Growth NPD process is ingrained Expand shares of acquired brands Leverage salesforce across COTs Operational Efficiencies Versatile manufacturing and R&D capabilities (liquids, powders, aerosols, gels, devices, …) Acquired 9 of 10 po
Slide 92: CHD Grows Share on Acquired Brands
CHD Grows Share on Acquired Brands Year Acquired Pre-Acquisition Share 2016 Share 2001 68.9% 75.3% 2001 3.2% 4.0% 2001 12.0% 30.6% 2001 22.8% 61.6% 2005 30.1% 33.4% 2006 26.1% 48.3% 2011 - 22.5% 2012 2.7% 3.9% Source: Nielsen FDMx & Total U.S. AOC, IRI FDMx Share prior to 2005 92
Slide 93: 2017 Bolt-On Acquisition: Viviscal
2017 Bolt-On Acquisition Viviscal is the #1 non-drug hair care supplement brand mainly sold in the U.S. and the U.K. with annual 2016 sales of $44 million. 93
Slide 94: 2017 Bolt-On Acquisition: Rectinol
2017 Bolt-On Acquisition ® Rectinol These are the #1 or #2 hemorrhoid care brands mainly sold in the U.K., Canada, Australia and South Africa with 2016 annual sales of $24 million. 94
Slide 95: Best in Class Free Cash Flow Conversion
“Best in Class” Free 6 Cash Flow Conversion 95
Slide 96: Best in Class FCF Conversion
“Best in Class” FCF Conversion Year Average 2007-2015 Church & Dwight 121% Clorox 112% Kellogg 111% Kimberly Clark 106% Colgate 105% Consumer Staples 104% Average 100% Procter & Gamble 97% Pepsi 91% Campbell’s 91% Coca-Cola 0% 20% 40% 60% 80% 100% 120% 140% Source : Bloomberg. See appendix. 96
Slide 97: Superior Overhead Management
7 Superior Overhead Management 97
Slide 98: SG&A is One of the Lowest of Major CPG Companies
SG&A is One of the Lowest of Major CPG Companies SG&A as % of Revenue RB-GB CHD TAP GIS KHC KMB CLX HSY K PG CL EPC KO PEP EL AVP SG&A data as reported is taken from latest SEC 10K filings as of 12/15. For peers that do not break out SG&A and marketing, above result is total SG&A less advertising pe
Slide 99: SG&A Investments for the Future
SG&A Investments for the Future International IT investments R&D investments expansion to drive to continue driving efficiency innovation 99
Slide 100: Simple Incentive Compensation
8 Simple Incentive Compensation 100
Slide 101: Simple Incentive Compensation Plan
Simple Incentive Compensation Plan 1. Bonuses Tied 100% to Business Results Gross Net Revenue Margin Expansion 2. Equity Compensation is 100% Stock Options Cash From EPS Operations 3. Management Required to be Heavily Invested in Company Stock 101
Slide 102: How We Run the Company
04. HOW WE RUN THE COMPANY 102
Slide 103: We Have 4 Operating Principles
We Have 4 Operating Principles Leverage #1 Brands Brands Leverage Assets Asset Light Leverage People Highly Productive Employees Leverage GOOD shareholder returns become Acquisitions GREAT shareholder returns 103
Slide 104: 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% 104
Slide 105: We Have an Explicit Operating System
We Have an Explicit Operating System EVERGREEN GEOGRAPHIC ACQUISITION ALLOCATION OF MODEL FOCUS CRITERIA CAPITAL 3% Organic NS Growth North America Primarily #1 or #2 TSR Accretive M&A OP Margin +50 bps Secondarily: Share Brands New Product Operating Income Europe Higher Growth R
Slide 106: Financials
05. FINANCIALS 106
Slide 107: Full Year 2016 Highlights
Full Year 2016 Highlights Domestic: 3.1% Organic sales growth +3.2% Int’l: 10.0% SPD: (6.6%) Volume growth +3.1% Adjusted gross margin +120 bps Marketing % -10 bps to 12.2% Adjusted SG&A +50 bps to 12.6% Adjusted operating margin +80 bps Adjusted EPS +9.3% to $1.77 Free Cash Flow $606MM Adjusted FCF
Slide 108: 2016 Quarterly Organic Sales
2016 Quarterly Organic Sales 5.2% 3.7% 2.7% 1.3% Q1 Q2 Q3 Q4 108
Slide 109: 2 Year Stacked Quarterly Organic Sales – Global Consumer
2 Year Stacked Quarterly Organic Sales – Global Consumer 10.5% 8.8% 8.1% 6.8% 6.2% Q1 Q2 Q3 Q4 FY 2015 2016 109
Slide 110: Best in Class FCF Conversion
“Best in Class” FCF Conversion Year Average 2007-2015 Church & Dwight 121% Clorox 112% Kellogg 111% Kimberly Clark 106% Colgate 105% Consumer Staples Average 104% Procter & Gamble 100% Pepsi 97% Campbell’s 91% Coca-Cola 91% 0% 20% 40% 60% 80% 100% 120% 140% Source : Bloomberg. See appendix. 110
Slide 111: Cash Conversion Cycle
Cash Conversion Cycle Tight Control of Working Capital Drives CCC Improvement. 52 40 32 34 36 32 27 21 2009 2010 2011 2012 2013 2014 2015 2016 Days 111
Slide 112: Strong Balance Sheet
Strong Balance Sheet Total Debt / Bank EBITDA 1.4x 1.5x 1.4x 1.4x 1.2x 0.6x 0.5x 2010 2011 2012 2013 2014 2015 2016 See appendix for reconciliation. 112
Slide 113: Significant Financial Capacity
Significant Financial Capacity As of December 31, 2016 (in $millions) $200 Cash & Cash Equivalents on Hand Acquisition $2,600 Power: Leverage Capacity $2.8B Current Debt $1,100 Credit Rating 2016 Bank EBITDA = $857M BBB+/Baa1 Leverage capacity to 3.50x EBITDA Example: Acquisition EBITDA multip
Slide 114: Aggressive But Achievable 2017 Targets
Aggressive But Achievable 2017 Targets 2017 Outlook Domestic: 2.5 – 3.0% Organic Sales ~3% Int’l: 4-5% SPD: 2-3% Adjusted Gross Margin +60bps Marketing +10bps SG&A +10bps Adjusted Operating Margin +40bps Other Income/(Expense) -$14MM Adjusted Effective Tax Rate 34.7% Adjusted EPS 7% Currency Neutral
Slide 115: CHD Consistent Solid Organic Sales Growth
CHD Consistent Solid Organic Sales Growth 5.2% 3.5% 3.6% 3.2% ~3.0% 1.9% 2012 2013 2014 2015 2016 2017E 115
Slide 116: Focus on Gross Margin
Focus on Gross Margin ~46.3% 45.7% 45.0% 44.5% 44.2% 44.1% 2012 2013 2014 2015 2016 2017E Footnote: 2016 & 2017 exclude the Brazil subsidiary charge. 116
Slide 117: Consistent Marketing Spend
Consistent Marketing Spend 12.5% 12.6% 12.2% 12.3% 12.2% ~12.3% 2012 2013 2014 2015 2016 2017E 117
Slide 118: Superior SG&A Management
Superior “SG&A” Management 13.3% 13.0% 12.6% ~12.7% 12.1% 12.1% 2012 2013 2014 2015 2016 2017E Note: 2015 adjusted for a pension settlement charge. 2017 adjusted for pension settlement and Brazil charges. 118
Slide 119: SG&A Flat Excluding Amortization
“SG&A” Flat Excluding Amortization Flat 12.4% 12.1% 11.0% 10.9% 11.3% ~11.1% 2012 2013 2014 2015 2016 2017E 119
Slide 120: Operating Margin %
Operating Margin % Operating profit expansion driven by gross margin. ~21.3% 20.9% 20.1% 19.5% 19.4% 18.7% 2012 2013 2014 2015 2016 2017E Note: 2015 adjusted for a pension settlement charge. 2017 adjusted for pension settlement and Brazil charges. 120
Slide 121: EBITDA Margin %
EBITDA Margin % Focused on growing our cash earnings. ~24.8% 24.4% 23.7% 22.8% 22.9% 22.3% 2012 2013 2014 2015 2016 2017E Note: EBITDA margin is a non-GAAP measure defined as Net Income + (Interest, Taxes, Depreciation, Amortization and non-cash compensation and charges), 2015 adjusted for pension s
Slide 122: Consistent Strong Adjusted EPS Growth
Consistent Strong Adjusted EPS Growth ~ $1.89 $1.77 $1.62 $1.51 $1.40 $1.23 ~7% 8% 9% 8% 14% 11% 2012 2013 2014 2015 2016 2017E See Appendix for 2015 & 2016 reconciliation. Note: 2017 outlook includes a $0.01 negative impact from foreign exchange and excludes impairment from UK pension settlement, B
Slide 123: Prioritized Uses of Free Cash Flow
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 123
Slide 124: Minimal Capital Investment
Minimal Capital Investment Capital Expenditures as a % of Sales $100 3.0% $90 2.5% 2.5% $80 2.1% 2.1% 2.0% $70 Victorville 1.8% VMS 1.5% 1.5% VMS $60 Capacity Capacity VMS 1.4% Capacity 1.0% $50 $40 $55 0.5% $30 0.0% 2012 2013 2014 2015 2016 2017E Major Projects On-going CapEx 124
Slide 125: 7% Dividend Increase in 2017
7% Dividend Increase in 2017 116 Consecutive Years of Dividends Target: 40% Payout Ratio $0.76 $0.71 $0.67 +7% $0.62 +6% $0.56 +8% +8% +11% +11% $0.48 +17% +17% +41% +41% +119% +35% 2012 2013 2014 2015 2016 2017E 125
Slide 126: Proposed Tax Reform - Benefits CHD
Proposed Tax Reform - Benefits CHD • Over 90% of taxable income is in the U.S. • ~95% of products sold in the U.S. market are sourced and produced domestically • U.S. imports and exports are essentially balanced 126
Slide 127: Slide 127
Slide 128: Reconciliations
Reconciliations For a full reconciliation, please visit our investor section at: www.churchdwight.com 128
Slide 129: 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 130: 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, the change in customer shipping arrangements, foreign exchange rate changes, the impact of an in
Slide 131: 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 i
Slide 132: 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 133: 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 134: 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-tim
Slide 135: 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 136: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Free Cash Flow as Percent of Net Income: Free cash flow as percent of net income is defined as the ratio of free cash flow to net income. Management views this as a measure of how effective the Company manages its cash flow relating to working capital and capital
Slide 137: Total Company Organic Sales Reconciliation
Total Company Organic Sales Reconciliation System Calendar/ Shipping Year Reported FX Acq/Div Disc. Ops. Upgrade Other Terms Organic 2016 2.9% 0.9% 1.2% 0.0% 0.0% 0.0% 0.0% 3.2% 2015 2.9% 2.7% -2.0% 0.0% 0.0% 0.0% 0.0% 3.6% 2014 3.2% 0.5% -0.2% 0.0% 0.0% 0.0% 0.0% 3.5% 2013 9.3% 0.5% -7.6% 0.0% -0.3
Slide 138: Consumer Domestic Organic Sales Reconciliation
Consumer Domestic Organic Sales Reconciliation System Calendar/ Shipping Year Reported FX Acq/Div Disc. Ops. Upgrade Other Terms Organic 2016 3.7% 0.0% -0.8% 0.0% 0.0% 0.2% 0.0% 3.1% 2015 4.5% 0.0% -1.3% 0.0% 0.0% -0.2% 0.0% 3.0% 2014 2.4% 0.0% -0.4% 0.0% 0.0% 0.0% 0.0% 2.0% 2013 11.9% 0.0% -9.6% 0.
Slide 139: Consumer International Organic Sales Reconciliation
Consumer International Organic Sales Reconciliation System Calendar/ Shipping Year Reported FX Acq/Div Disc. Ops. Upgrade Other Terms Organic 2016 4.8% 6.8% -1.6% 0.0% 0.0% 0.0% 0.0% 10.0% 2015 -6.4% 15.5% -0.9% 0.0% 0.0% 0.0% 0.0% 8.1% 2014 0.5% 2.7% 0.1% 0.0% 0.0% 0.0% 0.0% 3.3% 2013 4.5% 2.3% -3.
Slide 140: Specialty Products Organic Sales Reconciliation
Specialty Products Organic Sales Reconciliation System Calendar/ Shipping Year Reported FX Acq/Div Disc. Ops. Upgrade Other Terms Organic 2016 -7.1% 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% -6.6% 2015 7.3% 3.4% -10.0% 0.0% 0.0% 0.0% 0.0% 0.7% 2014 17.3% 1.0% 1.2% 0.0% 0.0% 0.0% 0.0% 19.5% 2013 -2.7% 1.3% 0.0%
Slide 141: Reported and Adjusted Condensed Statement of Income
Church & Dwight Co., Inc and Subsidiaries Reported and Adjusted Condensed Statement of Income (Amounts in Millions Except Per Share Amounts) Q4 2016 2016 2015 Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Net Sales $ 896.0 $ 896.0 $ 3,493.1 $ 3,493.1 $ 3,3
Slide 142: Reported and Adjusted Condensed Statement of Income
Church & Dwight Co., Inc and Subsidiaries Reported and Adjusted Condensed Statement of Income (Amounts in Millions Except Per Share Amounts) 2014 2013 2012 Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Net Sales $ 3,297.6 $ 3,297.6 $ 3,194.3 $ 3,194.3 $ 2,
Slide 143: Reported and Adjusted Condensed Statement of Income
Church & Dwight Co., Inc and Subsidiaries Reported and Adjusted Condensed Statement of Income (Amounts in Millions Except Per Share Amounts) 2011 2010 Reported Adjustments Adjusted Reported Adjustments Adjusted Net Sales $ 2,749.3 $ 2,749.3 $ 2,589.2 $ 2,589.2 Gross Profit 1,214.5 1,214.5 1,157.8 1,
Slide 144: Historic Free Cash Flow Conversion
Church & Dwight Co., Inc Historic Free Cash Flow Conversion 2007 - 2015 As Reported 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average 2016 Cash From Operations $ 248.7 $ 336.2 $ 400.9 $ 428.5 $ 437.8 $ 523.6 $ 499.6 $ 540.3 $ 606.1 $ 655.3 Capital Expenditures $ 48.9 $ 98.3 $ 135.4 $ 63.8 $ 76.6
Slide 145: Total Debt to Bank EBITDA Reconciliation
Church & Dwight Co., Inc Total Debt to Bank EBITDA Reconciliation ($ in millions) 2016 2015 2014 2013 2012 2011 2010 Total Debt as Presented (1) $ 1,120.1 $ 1,050.0 $ 1,086.6 $ 797.3 $ 895.6 $ 246.7 $ 333.3 Other Debt per Covenant (2) 79.3 83.5 88.0 90.3 79.1 45.9 11.7 Total Debt per Credit Agreemen