CHURCH & DWIGHT CO., INC. News Release Contact: Rick Dierker Chief Financial Officer 609-806-1200 CHURCH & DWIGHT REPORTS Q3 RESULTS REPORTED SALES +11.2%, ORGANIC SALES +3.2% Q3 EPS EXCEEDS OUTLOOK EXPECT Q4 REPORTED EPS +19%, ADJUSTED +14% 2017 Third Quarter Results 2017 Full Year Outlook • • Reported sales growth of approximately +7% Reported sales growth +11.2%; Organic +3.2% • • Organic sales growth of approximately +2.5% International (+6.2%) & SPD (+7.5%) organic sales growth • • Reported EPS $1.82, +4%; Adjusted $1.92, +8.5% Domestic volume growth +7% drives share gains • • Reported Cash from operations approximately $650MM Waterpik acquisition on-track EWING, NJ, NOVEMBER 2, 2017 – Church & Dwight Co., Inc. (NYSE: CHD) today announced third quarter 2017 reported EPS of $0.52, an increase of 10.6%. Adjusted EPS was $0.49 excluding a tax benefit ($0.03) from a prior year joint venture impairment charge. Third quarter 2017 reported net sales grew 11.2% to $967.9 million. Organic net sales grew 3.2% and was broad based driven by growth in the domestic business, continued expansion of the international business, and strong growth in the Specialty Products business. Weather related hurricane disruptions impacted organic growth by approximately -20 basis points during the quarter. Organic sales were driven by volume growth of 6.9%, partially offset by 3.7% of price from higher promotional investments. Matthew Farrell, Chief Executive Officer, commented, “We are pleased with our organic sales growth across all three divisions. In the domestic business, our targeted investment spending and higher marketing investment translated into share growth with 7 out of 11 power brands exceeding or meeting category growth. Our investments in our international business, particularly export, are paying off as evidenced by consistent organic growth which we expect to continue.” Third Quarter Review Consumer Domestic reported net sales were $729.2 million, a $64.4 million or 9.7% increase. Organic sales increased 2.2% due to higher volume (+7.1%) offset by price (-4.9%) attributable to higher promotional investments. Growth in ARM & HAMMER liquid laundry detergent, cat litter and baking soda, BATISTE dry shampoo and OXICLEAN stain fighters offset declines. Volume growth was strong as the business continued to support key new product launches with a significant increase in promotion and coupon support. Sales in non-measured channels continued to grow, especially online retail sales which increased approximately 70%. Consumer International reported net sales were $162.8 million, a $29.0 million or 21.7% increase driven by broad based household and personal care sales. Organic sales increased 6.2% due to higher volume (+7.1%) offset by price (-0.9%) as higher promotional investments offset favorable mix. Sales were driven primarily by FEMFRESH, OXICLEAN and STERIMAR in the export business, ARM & HAMMER cat litter and BATISTE in Canada,
FEMFRESH in Australia and STERIMAR and ARM & HAMMER baking soda in Mexico. Specialty Products reported net sales were $75.9 million, a $3.8 million or 5.3% increase. Organic sales increased 7.5% due to higher volume (+4.6%) and price (+2.9%) primarily in the animal productivity business. Gross margin decreased 10 basis points to 45.3% primarily due to the increased promotion and coupon investments in the domestic business offset by volume and positive impact of acquisitions and divestitures. Marketing expense was $111.9 million, an increase of $13.7 million or 14.0%. Marketing expense as a percentage of net sales increased 30 basis points to 11.6% as W aterpik’s lower percentage negatively impacted the basis point increase. Selling, general, and administrative expense (SG&A) was $127.9 million or 13.2% of net sales, a 160 basis point increase, primarily due to acquisition transition and amortization costs. Income from Operations on a reported and adjusted basis was $198.7 million or 20.5% of net sales. The reported effective tax rate was 28.7% compared to 35.6% last year. The current quarter rate includes a 400 basis point benefit due to the reversal of a tax reserve related to a prior year impairment charge. The full year adjusted tax rate is expected to be approximately 33%. Operating Cash Flow For the first nine months of 2017, net cash from operating activities was $424.1 million, a $70.9 million decrease from the prior year due to an increase in working capital, partially offset by higher cash earnings. The working capital increase was primarily driven by higher deferred and incentive compensation payments, higher inventories and timing of accounts receivable factoring. Capital expenditures for the first nine months were $20.9 million, a $7.2 million decrease from the prior year. The Company’s full year outlook for capital expenditures continues to be estimated at approximately $45 million. The full year outlook for net cash from operating activities is approximately $650 million. At September 30, 2017, cash on hand was $236.5 million, while total debt was $2,421.3 million. 2017 New Products Mr. Farrell commented, “In novation continues to be a big driver of our success. In support of our long-term strategy to drive revenue and earnings growth, we have launched and supported new products in several categories. We launched ARM & HAMMER SLIDE cat litter, a revolutionary new litter that doesn’t stick to the litter box. Of the fifteen new products that have launched in the category since 2011, SLIDE ranks second in repeat consumer purchases. ARM & HAMMER PLUS OXICLEAN unit dose 3-in-1 POWER PAKS laundry detergent has contributed to ARM & HAMMER unit dose laundry detergent growing share at six times the category rate in the third quarter while achieving its highest quarterly share in three years. The OXICLEAN liquid laundry detergent restage with improved efficacy, claims and packaging continues to build share as the restage progresses. TROJAN launched a new XOXO upscale condom targeting both men and women with a soft touch, aloe-lubricated latex in a unique portable carrying case. This launch has opened up new opportunities for condom advertising in prime-time television. We have expanded offerings and distribution of the BATISTE brand, leveraging its #1 U.S. share position to almost a one-third share of the dry shampoo category.” Share Repurchase Programs On November 1, the Board of Directors authorized a new stock repurchase program under which up to $500 million of the Company's common stock may be repurchased in the future to reduce the number of shares outstanding. The previously authorized share repurchase program has been terminated. In addition, the Company has a separate evergreen repurchase program that is intended to neutralize dilution associated with the exercise of stock options issued. Currently, the Company has approximately 250 million shares outstanding. Mr. Farrell commented, “The share repurchase program reflects the Company’s desire for stockholders to benefit from our continued strong growth and is an indication of our confidence in the Company’s performance. Importantly,
the Company continues to expect to generate significant free cash flow (cash from operating activities less capital expenditures). Our robust cash flow enables us to return cash directly to our stockholders while maintaining significant financial flexibility to conti nue to aggressively pursue acquisitions.” Outlook for 2017 With regard to 2017, Mr. Farrell said, “T his has been an exciting year for Church & Dwight based on our continued focus on innovation. This innovation has enabled our consumer brands to grow faster than the category rates. We expect reported sales growth of approximately 7% and organic sales growth of approximately 2.5%. On a reported basis, EPS is expected to be $1.82 per share or 4% reported EPS growth, which includes a $0.01 negative impact from the Brazil charge, $0.12 negative impact from the U.K. pension settlement, $0.03 positive impact from the joint venture tax benefit and zero impact from current year acquisitions. Excluding these charges and tax benefit, we expect to achieve $1.92 per share or 8.5% adjusted EPS growth. In 2017, as in previous years, we expect free cash flow to exceed net income.” In conclusion, Mr. Farrell said, “For the fourth quarter, we expect reported sales growth of approximately 12% and organic sales growth of approximately 2.5%. We expect EPS of $0.50 in the fourth quarter, a 19% increase over last year’s reported results and a 14% increase over last year’s adjusted results.” Church & Dwight Co., Inc. will host a conference call to discuss third quarter 2017 earnings results on November 2, 2017 at 10:00 a.m. Eastern time. To participate, dial 877-322-9846 within the U.S. and Canada, or 631-291-4539 internationally, using access code 95325863. A replay will be available two hours after the call at 855-859-2056 using the same access code. You also can participate by visiting the Investor Relations section of the Company’s website at www.churchdwight.com. Church & Dwight Co., Inc. manufactures and markets a wide range of personal care, household and specialty products under the ARM & HAMMER brand name and other well-known trademarks.
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