Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — Investor Day (February 2019)
156 slides from Church & Dwight's investor day presentation, Feb 5, 2019
Slide 1: Church & Dwight's Analyst Day 2019
CHURCH & DWIGHT’S ANALYST DAY 2019
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: 01 – Who We Are 05 – International Story 02 – Why We Are
01 – Who We Are 05 – International Story 02 – Why We Are Winning 06 – Animal Productivity Story 03 – ARM & HAMMER 07 - How We Run The Company 04 – 2019 Innovations 08 – Financials
Slide 4: The Short Story
The Short Story 2018 was another solid year. We have confidence in our future. Solid 2018 financial results Digitally savvy Consistent innovation International growth continues Animal Productivity opportunity Strong 2019 Outlook 4
Slide 5: Who We Are
01 Who We Are Matt Farrell, President and Chief Executive Officer
Slide 6: We Have an Evergreen Business Model
We Have an Evergreen Business Model Organic Sales Growth 3% EPS Growth 8% 6
Slide 7: Organic Sales – Sources
Organic Sales – Sources 2% United States 3% 6% International 5% Specialty Products 7
Slide 8: Power Brands
TROIANR =NQiir [kestens) ] POWER BRANDS Baliste waterpi k: o-
Slide 9: These Brands Drive Our Results
These 11 Brands Drive Our Results more than 80% of sales & profits are represented by these 11 POWER BRANDS 9
Slide 10: Our Portfolio Is Balanced & Diversified
Our Portfolio Is Balanced & Diversified A well-balanced portfolio of household and personal care products. Household: 45% Specialty Products: Personal Care: 48% 7% 10
Slide 11: Diversified Product Portfolio
Diversified Product Portfolio Our Unique Product Portfolio Has Both Value and Premium Products Premium: 65% Value: 35% 11
Slide 12: We are an Acquisition Platform
We are an Acquisition Platform BBB+ Revenue Operational Excellent Access to Growth Efficiencies Integration Capital Track Record 12
Slide 13: Long History of Growth Through Acquisitions
Long History of Growth Through Acquisitions Net Sales (Billions) $4.5 $4.1 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.5 $1.0 $0.5 $- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 13
Slide 14: Acquired 10 of our 11 Power Brands Since 2001
Acquired 10 of our 11 Power Brands Since 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2005 #1 Extreme Value Laundry #1 Battery Powered #1 Condom #1 Pregnancy Kit #1 Depilatory Detergent Toothbrush Acquired 2006 Acquired 2008 Acquired 2011 Acquired 2012 Acquired 2017 #1 Power
Slide 15: Being the leading brand gives us the ability to take price
Being the leading brand gives us the ability to take price. • Pricing covers 30% of the portfolio. • We are having ongoing discussions about other categories for 2019. 15
Slide 16: 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 16
Slide 17: 11 Power Brands Today, 20 Tomorrow
11 Power Brands Today, 20 Tomorrow Net Sales (Billions) $4.0 $3.5 11 $3.0 10 9 $2.5 8 $2.0 7 6 $1.5 $1.0 5 $0.5 1 $0.0 … 1846 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Note: Trojan, Nair and First Response acquired in two parts
Slide 18: We Operate in the Land of Giants
We Operate in the Land of Giants 2018 Net Sales (billions) $66.8 $58.3 $18.5 $15.5 $13.7 $6.1 $4.1 P&G Unilever Kimberly Clark Colgate Reckitt* Clorox Church & Dwight Source: 2018 SEC Filings * 2017 Net Sales 18
Slide 19: Nimble Organizational Structure
Nimble Organizational Structure quick decision easy ability to adapt making communication 19
Slide 20: Deliver Outstanding Returns to Our Shareholders
Deliver Outstanding Returns to Our Shareholders 10 YEAR: 5 YEAR: 3 YEAR: 2018: 20.5% 17.6% 18.0% 33.2% 20
Slide 21: Why We are Winning
02 Why We are Winning 21
Slide 22: 2018 Organic Sales
2018 Organic Sales 4.3% United States 4.3% 7.8% International -3.4% Specialty Products 22
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 winning in e-commerce. 23
Slide 24: We Are in the Right Categories
We Are in the Right Categories 2015 2016 2017 2018 Clumping Litter Water Flossers Dry Shampoo Toothache Vitamins Toothpaste Baking Soda Battery Toothbrush Laundry Hair Thinning Pregnancy Test Kits Stain Fighters Condoms Depilatories Carpet Deodorizers WEIGHTED CATEGORY GROWTH 3.1 3.3 2.8 2.9 Source:
Slide 25: We Know How to Grow Share
We Know How to Grow Share 7 out of 11 power brands maintained or grew share in 2018 2015 2016 2017 2018 Source: Nielsen Total U.S. AOC 25
Slide 26: 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 Source: Nielsen Total U.S. AOC 26
Slide 27: 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 50.0% 30% 20% 40.0% 25% 15% 20% 30.0% 15% 10% 20.0% 10% 10.0% 5% 5% 0.0% 0% 0% 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2
Slide 28: We Continue to Win in E-Commerce
We Continue to Win in E-Commerce Church & Dwight Sales ~8% 7% 5% 2% 1% 2015 2016 2017 2018 2019E 28
Slide 29: #1 products on Amazon
#1 products on Source: 3rd party data 29
Slide 30: ARM & HAMMER
03 ARM & HAMMER #MorePowerToYou Britta Bomhard, EVP Chief Marketing Officer
Slide 31: Brands Consumers Love
BRANDS CONSUMERS LOVE 31
Slide 32: (vitafusion’) ti
(vitafusion’) ti ESPONSE }
Slide 33: Stain Fighters Category: OxiClean Hits a Record
Stain Fighters Category: OxiClean Hits a Record OxiClean Dollar Share of Stain Fighters 53.0% 50.9% 49.2% 46.6% 2015 2016 2017 2018 Source: Nielsen AOD, data ending 12/28/18 33
Slide 34: [i Ciitte ies
[i Ciitte ies
Slide 35: First ARM & HAMMER Trademark: 1905
First ARM & HAMMER Trademark: 1905 Note: ARM & HAMMER was first registered as a trademark in 1905 by the US Patent & Trademark Office. 35
Slide 36: ARM & HAMMER is a Part of the American DNA
ARM & HAMMER is a Part of the American DNA 36
Slide 37: U.S. households buy an ARM & HAMMER product every year
1 in 2 U.S. households buy an product every year. 37
Slide 38: Consumers Love Arm & Hammer
Consumers Love Arm & Hammer 688,000,000,000 cookies made with ARM & HAMMER Baking Soda 31,000,000,000 gallons of swimming pool water are treated with ARM & HAMMER Baking Soda. 300,000 kidney dialysis patients use ARM & HAMMER Baking Soda to purify their blood. 38
Slide 39: Consumers Love Arm & Hammer
Consumers Love Arm & Hammer HALF of refrigerators are fresher because of ARM & HAMMER Baking Soda 39
Slide 40: Consumers Love Arm & Hammer
Consumers Love Arm & Hammer ARM & HAMMER laundry detergent washes 62.5 billion pounds of laundry each year. or equivalent to 6.5 million adult elephants 40
Slide 41: A Billion Dollar Brand
a BILLION dollar brand. 41
Slide 42: Engage the consumer by using emotion
In the PAST, we would educate the consumer on features and benefits. In the PRESENT and FUTURE, we engage the consumer by using emotion.
Slide 43: More Power To You
MORE POWER TO YOU. The true power of ARM & HAMMER is derived from the ingenuity of the people who use it.
Slide 44: More Power To You
If you can laugh over spilled milk, MORE POWER TO YOU. 44
Slide 45: More Power To You
If you work a 60-hour week and STILL get the kids to school looking fresh, MORE POWER TO YOU. 45
Slide 46: More Power To You
If things get gross and nasty, don’t panic. You have the tools to make it right. MORE POWER TO YOU. 46
Slide 47: More Power To You
That’s why we create powerful products stacked with solutions — to tackle everyday challenges with strength and a smile. MORE POWER TO YOU. 47
Slide 48: ARM & HAMMER Baking Soda Gives You The Power To Tackle Any Challenge
ARM & HAMMER™ Baking Soda Gives You The Power To Tackle Any Challenge. “48
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Slide 50: More Power To You People Magazine Spread
More Power To You People Magazine Spread Print ad in the January 7th issue of people magazine. 50
Slide 51: Making it Easy to Interact with Us
Making it Easy to Interact with Us 51
Slide 52: 40% of ARM & HAMMER media spend is digital
40% of the ARM & HAMMER media spend is digital. 52
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Slide 55: Clump and Seal website
@OS © cumpssealbyArm&Hamm x + ra © OQ © NotSecure | www.clumpandseal.com > W CLUMP « COMPLETE ODOR SSEAL SEALING LITTER SLIDE by lam Moshow SIGN UP RIGHT MEOW! CAT CHARM REWARDS PROGRAM 55
Slide 56: Come Join the Fun
COME JOIN THE FUN! 56
Slide 57: 2019 Innovation
04 2019 Innovation
Slide 58: Introducing Waterpik Sonic-Fusion
Introducing waterpik sonic-fusion The world’s first flossing toothbrush. Now you can brush and floss at the same time! 58
Slide 59: Only 16% of American adults floss daily
Although most people recognize the importance of flossing, only 16% of American adults floss daily. 59
Slide 60: Simple, no hassle solution for superior oral health
Simple, no hassle solution for superior oral health. Combination of Sonic Toothbrush and water flosser technology Clinically Proven to be twice as effective as traditional brushing and flossing 60
Slide 61: Waterpik: Behind the Design
Waterpik: Behind the Design 61
Slide 62: Introducing OxiClean Dark Protect
Introducing OxiClean Dark Protect For dark and black fabrics. 62
Slide 63: 42% of all wash loads are dark loads
42% of all wash loads are dark loads Source: AcuPOLL Project Lake Zoar April 2017 63
Slide 64: Specially formulated for dark & black fabrics
Specially formulated to keep dark & black fabrics looking newer longer. Anti-fade technology Enzyme to prevent & remove pills; helps smooth fabrics OxiClean stain fighters Cold water solubility 64
Slide 65: ARM & HAMMER plus OxiClean Fade Defense
Introducing ARM & HAMMER plus OxiClean Fade Defense for vibrant whites and bright colors. 65
Slide 66: Color fading ranks as the #2 laundry frustration
“Color fading” ranks as the #2 laundry frustration. Source: SMI Alcott Segmentation Study April 2016 66
Slide 67: Specially developed for vibrant whites and colored fabrics
Specially developed for vibrant whites and colored fabrics. Brightens & protects against fading 67
Slide 68: ARM & HAMMER Cloud Control
Introducing ARM & HAMMER Cloud Control Breathe easy clumping litter. 68
Slide 69: Cloud of nasties when changing litter
“Cloud of nasties” can cause discomfort when changing out the litter. 69
Slide 70: Breathe easy with no cloud of nasties
Now you can breathe easy with NO CLOUD OF NASTIES when cleaning the litter box. 100% dust free Dander control technology Allergen-free light scent 7-day odor control GUARANTEED 70
Slide 71: Introducing vitafusion & L'il Critters Organic Vitamins
Introducing vitafusion & L’il Critters Organic Vitamins. 71
Slide 72: Americans consuming organic products
50% of Americans now consume organic products at least occasionally 55% of millennials prefer supplements derived from organic sources (highest among all age groups) Sources: USDA Organic Market Overview 2017, MNI Supplements Insights May 2018 72
Slide 73: Vitafusion/L'il Critters Organic Vitamins
Vitafusion/L’il Critters Organic Vitamins MORE of what And LESS of what consumers WANT. they DON’T. NO Synthetic FD&C Dyes 73
Slide 74: Introducing Nair Leg Masks
Introducing Nair Leg Masks The first masks for legs that beautify skin while removing hair. 74
Slide 75: 86% of facial mask users interested in leg masks
86% of facial mask users are interested in purchasing & using a mask for legs Sources: Kantar Hair Removal Feb 2018; C-Space Study March 2018 75
Slide 76: Your legs deserve the attention
“Your legs deserve the attention.” 76
Slide 77: Introducing Orajel Toothache Strips
Introducing Orajel Toothache Strips Instant and targeted, long-lasting pain relief. 77
Slide 78: Revolutionary new toothache relief form
Revolutionary new toothache relief form. Strips stay in place for targeted relief Dissolve slowly for long-lasting relief Cool mint taste 78
Slide 79: Introducing Batiste Hydrating & Volumizing Dry Shampoo
Introducing Batiste Hydrating dry shampoo & Volumizing dry shampoo. 79
Slide 80: 80% of women don't wash hair every day
While 80% of women don’t wash their hair every day, only 24% are currently using dry shampoo. Why?... …because 28% don’t think it’s for their hair type. Sources: MRI Doublebase 2016, Mintel 2013,Nielsen Panel Aug 2017; AcuPOLL Project Lake Omega Shelf Study, November 2017 80
Slide 81: Hydrating. Volumizing.
Hydrating. Volumizing. For Dry Hair For Fine Hair Refreshes Hair Without Refreshes and Adds Drying Body and Texture With Moisturizing Avocado With Plumping Collagen 81
Slide 82: Introducing Trojan The Edge
Introducing Trojan The Edge Take pleasure to the limit. 82
Slide 83: Gen Z values experience and adventure
Gen Z places exceptional value on experience, adventure and living boldly. 83
Slide 84: It's a big sexy world
“It’s a big sexy world.” 84
Slide 85: International Story
05 International Story Steve Cugine, EVP International
Slide 86: International Evergreen Target: 6%
International Evergreen Target: 6% 2% United States 3% 6% International 5% Specialty Products 86
Slide 87: International Net Sales: Increasing Scale
International Net Sales: Increasing Scale ~$710 MM 81% ~$430 MM United States 2013 2018 Footnote: In constant dollars 87
Slide 88: International Organic Net Sales: Faster Growth
International Organic Net Sales: Faster Growth Net Sales Average Growth 2012 - 2014 2015 - 2018 ~3% ~8% 81% United States Our growth rate has more than doubled on a much larger base … 88
Slide 89: International Business is Growing Organically
International Business is Growing Organically Q4 9.0% 10.0% 8.1% 7.8% 7.8% growth Evergreen target 6.0% 3.3% 2014 2015 2016 2017 2018 Note: Organic sales growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most directly comparable GAAP measure. 89
Slide 90: International Net Sales Composition
International Net Sales Composition Europe 2018 International 23% Net Sales: Canada Australia 31% 8% $710 million 81% Mexico 8% United StatesTotal Export 28% Brazil 2% 90
Slide 91: 2018 Sources of International Organic Growth
2018 Sources of International Organic Growth Subsidiaries: +4.3% Export Markets: +16.0% 91
Slide 92: Fuel for Growth: Subsidiary Sales Exceed $510 MM
Fuel for Growth: Example #1 Subsidiary Sales: Exceed $510 MM Enabled by: • Brand Expansion – OxiClean Ultra Gel, VMS, Batiste… • Acquisition Acceleration - Waterpik • Pricing 92
Slide 93: Fuel for Growth: Asia Sales Exceed $90MM
Fuel for Growth: Example #2 Asia: Sales exceed $90MM for the first time Enabled by: • DKSH distribution expansion SE Asia • China reboot – Jahwa partnership launch in Q1 2019 93
Slide 94: Building Global Capabilities: Recent Accomplishments
Building Global Capabilities: Recent Accomplishments Local teams Doubled our staff in Built DTC capability established in Singapore and in Europe and Shanghai and Taiwan Panama Australia Launched New Direct Creating Localized Subsidiary in Germany Marketing content 94
Slide 95: The UK's #1 piles treatment
The UK's #1 piles treatment 95
Slide 96: Committed to 6% Organic Growth
Committed to 6% Organic Growth … • Existing brands still have significant runway • Acquired brands are building too • Exports will continue to grow double digits • Investments in SE Asia & China will pay off 96
Slide 97: Animal Productivity Story
06 Animal Productivity Story
Slide 98: Specialty Products Evergreen Target: 5%
Specialty Products Evergreen Target: 5% 2% United States 3% 6% International 5% Specialty Products 98
Slide 99: Source of Specialty Product Growth
Source of Specialty Product Growth 6% Animal Productivity 5% 3% Bulk Chemicals 99
Slide 100: Humans are consuming resources faster than we replace them
Humans are consuming resources faster than we are replacing them. Source: World Wild Life Fund and the Global Footprint Network 100
Slide 101: Natural Solutions
Natural Solutions NUTRITIONAL SUPPLEMENTS 101
Slide 102: Acquisitions Created a More Balanced Business
Acquisitions Created a More Balanced Business… % Non-Dairy Sales 24% <1.0% 2015 2018 102
Slide 103: …and an International Presence
…and an International Presence % International Sales 13.0% 5.0% 2015 2018 103
Slide 104: We are Positioned for 5% Organic Growth
We are Positioned for 5% Organic Growth • Trusted brand • Aligned with consumers trend • Multiple species • Global growth 104
Slide 105: How We Run the Company
07 How We Run the Company 105
Slide 106: We Have FIVE Operating Principles
We Have FIVE Operating Principles 1 Leverage Brands #1 brands Brands Brands People 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 ret
Slide 107: Incentive Compensation Directly Linked to TSR
Incentive Compensation Directly Linked to TSR 1. Bonuses are tied 100% to Net business results. Revenue 2. Equity compensation is Gross Margin 100% stock options. Expansion EPS 3. Management is required to be heavily invested in Cash From Operations company stock. 107
Slide 108: All CHD Employees Focus on Gross Margin
All CHD Employees Focus on Gross Margin Gross margin is 25% of all employees’ a n n u a l b o n u s . 108
Slide 109: Key Gross Margin Growth Drivers
Key Gross Margin Growth Drivers Good to Supply Great Cost Chain Optimization Optimization Acquisition New Synergies Products 109
Slide 110: Church & Dwight's Long History as a Friend to the Environment
Church & Dwight’s Long History as a Friend to the Environment 1888 1907 1970s 2006 2018 Company Company institutes Sole sponsor of first Church & Dwight 100% of global introduces the use of recycled Earth Day. launches electricity demand pro-environmental paperboard to ARM & HAMMER supplied by renew
Slide 111: Sustainability Commitments: Environmental
Sustainability Commitments: Environmental Our goal is to reduce global process water and/or wastewater by 25% by 2022*. Today, we have achieved 20% of that goal which equates to 11.6 million gallons. *using 2016 as baseline. 111
Slide 112: Sustainability Commitments: Environmental
Sustainability Commitments: Environmental Today, our global operations solid waste recycling is at 67%. Our goal is to achieve a rate of 75% by 2020. 112
Slide 113: Sustainability Commitments: Environmental
Sustainability Commitments: Environmental Today, we are at 55% carbon neutral. Our goal is to achieve 100% carbon neutral status for all global operations by end of 2025. 113
Slide 114: ESG Recognitions
ESG Recognitions BARRONS 2018 100 Most Sustainable Companies x Forbes ust) capital. SEPA GREEN POWER PARTNER DRUCKER INSTITUTE* FTSE4Good 114
Slide 115: Financials
08 Financials Rick Dierker, Chief Financial Officer
Slide 116: 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% 116
Slide 117: Evergreen Model – Organic Sales
Evergreen Model – Organic Sales Total Domestic International SPD Organic Sales +2.0% +6.0% +5.0% +3.0% 117
Slide 118: Q4 2018 Highlights – Strong Finish
Q4 2018 Highlights – Strong Finish Domestic: 4.0% Organic sales growth +4.3% International: 9.0% SPD: -3.7% Consumer organic +4.9% Adjusted gross margin -250 bps Marketing Change +10 bps Adjusted EPS +9.6% to $0.57 Organic sales, adjusted gross margin and adjusted EPS are non-GAAP measures. Please r
Slide 119: 2018 Quarterly Organic Sales
2018 Quarterly Organic Sales 4.7% 4.4% 4.3% 3.8% Q1 Q2 Q3 Q4 119
Slide 120: Domestic Price/Mix Progression
Domestic Price/Mix Progression 2 consecutive quarters of positive 3.0% price/mix 2.0% 1.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -1.0% -2.0% 2017 2018 -3.0% -4.0% -5.0% -6.0% -7.0% Price/Mix 120
Slide 121: 2018 Gross Margin
2018 Gross Margin Q4 Full Year Volume/Price/Mix +20 bps +20 bps Commodities: Resin, Corrugate/cartons, Commodity & Transportation (230) bps (170) bps Fragrances, Vitamins Manufacturing: Tariffs, Other manufacturing costs (120) bps (80) bps I/C Productivity Programs +80 bps +80 bps Foreign Exchange +
Slide 122: Full Year 2018 Highlights
Full Year 2018 Highlights Domestic: 4.3% Organic Sales Growth +4.3% International: 7.8% SPD: -3.4% Adjusted Gross Margin -140 bps Marketing % 11.7% Adjusted SG&A 13.6% Adjusted EPS +17.0% to $2.27 Cash From Operations $763MM FCF Conversion 124% Organic sales, adjusted gross margin, adjusted SG&A, ad
Slide 123: 2019 Outlook
2019 Outlook
Slide 124: 2019: 7-9% EPS Growth
2019: 7-9% EPS Growth 2019 Outlook Reported Sales ~3% Organic Sales ~3.5% Gross Margin: (+35 bps Gross Margin +10 bps ex-tariff) Marketing: SPD Growth – Marketing -10 bps Mix Impact SG&A -30 bps Operating Margin + 50 bps Effective Tax Rate ~21% EPS 7-9% Cash From Operations ~$800 Outlook as of Febru
Slide 125: 2019 Organic Sales Outlook
2019 Organic Sales Outlook Total Domestic International SPD Organic Sales +2.5% +6.0% +9.0% ~3.5% 125
Slide 126: Gross Margin Expansion in 2019
Gross Margin Expansion in 2019 2018 2019 Price/Volume/Mix +20 bps +125 bps Commodities & Transportation (170) bps (130) bps Other Manufacturing (80) bps (60) bps + Inflation (250) bps (190) bps + Productivity Programs +80 bps +100 bps + FX +10 bps - + Tariff Impact - (25) bps Total Gross Margin Expa
Slide 127: CHD Consistent Solid Organic Sales Growth
CHD Consistent Solid Organic Sales Growth 4.3% ahead of our evergreen 3.5% target of 3.2% 3.0% 2.7% 2016 2017 2018 2019E Note: Organic sales growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to net sales the most comparable GAAP measures. 127
Slide 128: Focus on Gross Margin
Focus on Gross Margin ~44.8% 45.7% 45.8% ex-tariffs 44.4% 44.5% 2016 2017 2018 2019E Note: Percentages are adjusted gross margin, a non GAAP measure. See appendix for adjustments to gross margin presented in accordance with GAAP. 128
Slide 129: Marketing Spend
Marketing Spend SPD Growth – Mix Impact 12.2% 12.0% 11.7% 11.6% 2016 2017 2018 2019E 129
Slide 130: Superior SG&A Management
Superior “SG&A” Management 13.6% 13.3% 13.3% 12.6% 2016 2017 2018 2019E Note: Adjusted SG&A is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 130
Slide 131: SG&A Mostly Flat Excluding Acquisition Amortization
“SG&A” Mostly Flat Excluding Acquisition Amortization “flattish” 11.3% 11.6% 11.8% 11.6% 2016 2017 2018 2019E Note: Adjusted SG&A is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 131
Slide 132: Consistent Strong Adjusted EPS Growth
Consistent Strong Adjusted EPS Growth $2.43 - $2.47 $2.27 $1.94 ~7-9% 17% $1.77 9.6% 9.3% 2016 2017 2018 2019E Note: Adjusted EPS growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 132
Slide 133: Strong Adjusted Margin Expansion
Strong Adjusted Margin Expansion Gross Margin EBITDA Margin 23.3% 44.4% 17.7% 40.1% 2008 2018 2008 2018 133
Slide 134: Best in Class FCF Conversion
“Best in Class” FCF Conversion 2018 FCF Conversion (%) Church & Dwight 124% P&G Colgate Energizer Clorox Peer Average 91% Kimberly Clark Reckitt Newell 0% 20% 40% 60% 80% 100% 120% 140% Sources: Bloomberg, Nasdaq and Company filings 134
Slide 135: Cash Conversion Cycle
Cash Conversion Cycle Tight Control of Working Capital Drives CCC Improvement. 52 40 34 36 32 32 27 21 18 22 20 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Days 135
Slide 136: Strong Balance Sheet
Strong Balance Sheet Total Debt/Bank EBITDA 2.6x 2.2x <2.0x 1.4x 1.5x 1.4x 1.4x 1.2x Credit Rating BBB+/Baa1 2012 2013 2014 2015 2016 2017 2018 2019E Note: Total debt/EBITA is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. 136
Slide 137: 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 137
Slide 138: Significant Financial Capacity
Significant Financial Capacity As of December 31, 2018 (in $millions) Cash & Cash Equivalents on Hand $317 Acquisition Power: $2.5B Leverage Capacity $2,150 Current Outstanding Debt $2,125 • 2018 Q4 TTM Bank EBITDA = $964M • Leverage capacity to 3.75x EBITDA • Example: Acquisition EBITDA multiple of
Slide 139: Minimal Capital Investment
Minimal Capital Investment Capital Expenditures as a % of Sales 2.1% 2.1% 2.0% $90 $80 1.8% 1.7% $15 Unit dose $70 1.4% in-house $60 $11 VMS Capacity $35 VMS 1.2% $6 Capacity $16 VMS waterpik $50 Capacity $40 $70 $30 $56 $50 $54 $20 $45 $45 $36 $10 $- 2013 2014 2015 2016 2017 2018 2019E On-going Cap
Slide 140: 5% Dividend Increase in 2019
5% Dividend Increase in 2019 $0.91 $0.87 +5% $0.76 +14% 118 $0.71 $0.67 +7% $0.62 +6% +7% +8% +6% +11% +8% +8% +11% consecutive +11% +17% +17% +41% years of +41% dividends +119% +35% 2014 2015 2016 2017 2018 2019E 140
Slide 141: Deliver Outstanding Returns to Our Shareholders
Deliver Outstanding Returns to Our Shareholders 10 YEAR: 5 YEAR: 3 YEAR: 2018: 20.5% 17.6% 18.0% 33.2% 141
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Slide 143: Reconciliations
Reconciliations www.churchdwight.com 143
Slide 144: 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 145: 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 146: 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 147: 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 148: 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 149: 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 150: 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 151: 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 152: Total Company Organic Sales Reconciliation
Total Company Organic Sales Reconciliation System Calendar/ Shipping Year Reported FX Acq/Div Disc. Ops. Upgrade Other Terms Organic 2018 9.8% 0.0% -5.5% 0.0% 0.0% 0.0% 0.0% 4.3% 2017 8.1% 0.0% -5.4% 0.0% 0.0% 0.0% 0.0% 2.7% 2016 2.9% 1.2% -0.9% 0.0% 0.0% 0.0% 0.0% 3.2% 2015 2.9% 2.7% -2.0% 0.0% 0.0
Slide 153: Reported & Adjusted Non Gaap Reconciliations
Reported & Adjusted Non Gaap Reconciliations For the year ending December 31, 2018 2017 2016 Adjusted Gross Margin Reconciliation Gross margin Reported 44.4% 45.8% 45.5% Brazil Charge 0.0% 0.0% 0.2% Gross Margin - Adjusted (non-gaap) 44.4% 45.8% 45.7% Adjusted SG&A Reconciliation SG&A - Reported 13.
Slide 154: Reported & Adjusted Non Gaap Reconciliations
Reported & Adjusted Non Gaap Reconciliations For the year ending December 31, 2018 2017 2016 Adjusted EPS Reconciliation EPS - Reported $ 2.27 $ 2.90 $ 1.75 Pension Settlement Charge $ - $ 0.12 $ - Brazil Charge $ - $ 0.01 $ 0.02 Joint Venture I mpairment Tax Benefit $ - $ (0.03) $ - Natronx Charge
Slide 155: SG&A less Amortization Expense Reconciliation
Church & Dwight Co., Inc. and Subsidiaries SG&A less Amortization Expense Reconciliation 2018 2017 2016 2015 2014 2013 SG&A as % of Net Sales - Reported 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 - -0.1% Amortization Expense -1.8% -1.7% -
Slide 156: Total Debt to Bank EBITDA Reconciliation
Church & Dwight Co., Inc Total Debt to Bank EBITDA Reconciliation ($ in millions) 2018 2017 2016 2015 2014 2013 Total Debt as Presented (1) $ 2,107.1 $ 2,374.3 $ 1,120.1 $ 1,050.0 $ 1,086.6 $ 797.3 Other Debt per Covenant (2) 56.7 59.2 75.1 83.5 88.0 90.3 Total Debt per Credit Agreement $ 2,163.8 $