Church & Dwight Co., Inc. ® 2015 ANNUAL REPORT 47369.indd 1 3/23/16 3:44 PM Key Financial Highlights IN MILLIONS, EXCEPT PER SHARE DATA 2014 2015 reportedreported adjusted* NET SALES $ 3,298 $ 3,395 $ 3,395 GROSS PROFIT MARGIN 44.1 % 44.5 % 44.5 % INCOME FROM OPERATIONS $ 641 $ 674 $ 683 (2) OPERATING PROFIT MARGIN 19.4 % 19.8 % 20.1 %(2) NET INCOME $ 414 $ 410 $ 434 (3) NET INCOME PER SHARE DILUTED $ 3.01 $ 3.07 $ 3.25 (3) DIVIDENDS PER SHARE $ 1.24 $ 1.34 $ 1.34 YEAR-END STOCK PRICE $ 78.81 $ 84.88 $ 84.88 2015 Key Financial Results On February 2, 2016, the • Worldwide net sales increased 2.9%. Company declared a 6% • Organic sales increased 3.6%.(1) increase in its quarterly • Gross profi t margin increased 40 basis points to 44.5%. dividend from $0.335 per • Adjusted operating profi t margin increased share to $0.355 per share. 70 basis points to 20.1%. • Net cash from operations increased to a record level of $606 million. • Adjusted earnings per share increased 7.7%. NET SALES EARNINGS PER SHARE (in millions of dollars) (in dollars) 2013 $3,194 2013 $2.79 2014 $3,298 2014 $3.01 2015 $3,395 2015 $3.25 For additional information, see Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. *This annual report includes non-GAAP fi nancial measures, including adjusted income from operations, adjusted operating profi t margin, adjusted net income, adjusted EPS, organic sales, and free cash fl ow, which differ from reported results using Generally Accepted Accounting Principles (GAAP). (1) The reference to the 3.6% organic net sales growth in 2015 refl ects the following adjustments to the 2.9% reported on net sales growth: foreign currency exchange fl uctuations 2.7% partially offset by acquisitions (2.0%). (2) Adjusted Income from Operations excludes an $8.9 million pre-tax pension settlement charge. (3) Adjusted Net Income and Adjusted EPS exclude the after tax impact of the pension charge ($6.7 million or $0.05 per share) and the Natronx impairment charge ($17.0 million or $0.13 per share). (4) Free cash fl ow of $544 million is defi ned as cash from operating activities of $606 million less capital expenditures of $62 million. Free cash fl ow conversion of 125% is defi ned as the ratio of free cash fl ow of $544 million to adjusted net income of $434 million. 47369.indd 2 3/23/16 3:44 PM Company Profile The combination of the core Church & Dwight Co., Inc., founded in 1846, is the leading U.S. producer of ARM & HAMMER brand and sodium bicarbonate, popularly known as baking soda, a natural product that cleans, deodorizes, leavens and buffers. The Company’s ARM & HAMMER the other nine Power Brands brand is one of the nation’s most trusted trademarks for a broad range of make Church & Dwight one consumer and specialty products developed from the base of bicarbonate of the leading consumer and related technologies. packaged goods companies Church & Dwight’s consumer products business is organized into two segments: in the United States. Consumer Domestic, which encompasses both household and personal care products, and Consumer International, which primarily consists of personal care products. The Company has ten key brands representing approximately 80% of its consumer sales. These so-called “Power Brands” include ARM & HAMMER, OXICLEAN, FIRST RESPONSE, ORAJEL, XTRA, TROJAN, SPINBRUSH, NAIR, BATISTE and L’IL CRITTERS and VITAFUSION (VMS). About 40% of the Company’s domestic consumer products are sold under the ARM & HAMMER brand name and derivative trademarks, such as ARM & HAMMER liquid and powder laundry detergent, ARM & HAMMER cat litter, ARM & HAMMER dental care and ARM & HAMMER baking soda. The remaining nine power brands have been added to the Company’s portfolio since 2001 through several acquisitions. The combination of the core ARM & HAMMER brands and the other nine power brands make Church & Dwight one of the leading consumer packaged goods companies in the United States. Church & Dwight’s third business segment is Specialty Products. This business is a leader in specialty inorganic chemicals, animal nutrition, and specialty cleaners. Growth Driven by 10 Power Brands ARM & HAMMER OXICLEAN FIRST RESPONSE ORAJEL XTRA More aisles in the grocery store than #1 Laundry #1 Branded #1 Oral Care Pain #1 Extreme Value any other brand; A&H brands are in 86% Additive Brand Pregnancy Kit Relief Brand Laundry Detergent of U.S. households in America TROJAN SPINBRUSH NAIR BATISTE L’IL CRITTERS & VITAFUSION #1 Condom Brand #1 Battery Powered #1 Depilatory Brand #1 Dry Shampoo #1 Gummy Brands for Kids and Adults Toothbrush Brand Based on AC Nielsen 52 weeks ending 12/19/15 All-Outlet P. 1 Church & Dwight Co., Inc. 2015 Annual Report 47369.indd 1 3/23/16 3:44 PM Stockholder Letter Dear Fellow Stockholder, I am pleased to report that we delivered another very successful year of revenue and earnings growth in 2015: • Reported net sales were $3,394.8 million, a 2.9% increase. • Organic sales increased 3.6% driven by 3.0% revenue growth in our Matthew T. Farrell Consumer Domestic business and strong 8.1% revenue growth in our President and Consumer International business. Chief Executive Offi cer • Gross profi t margin increased 40 basis points to 44.5% due to a normalized pricing environment in the laundry category, lower commodity costs, productivity programs and the impact of higher margin acquired businesses. • Adjusted EPS was $3.25 per share, an 7.7% increase over the previous year’s EPS of $3.01 per share. • We generated $606.1 million of cash from operating activities and invested $61.8 million in capital expenditures resulting in free cash fl ow of $544.3 million.(4) Richard A. Dierker Executive Vice President and Chief Financial Offi cer These record results positively impacted the measure that matters most to many of our stockholders—Total Shareholder Return (TSR)—which refl ects the combination of stock price appreciation and dividends. We manage Church & Dwight with the goal of delivering strong TSR and will continue to focus on this goal in 2016 and beyond. In 2015, we achieved a TSR of 9.4%. Over the past decade, we delivered an annual TSR of 19.1%, signifi cantly better than the 5.1% TSR of the S&P 500 stock index during the same period. In dollar terms, if you invested $1,000 each on January 1, 2006 in Church & Dwight stock and the S&P 500 stock index, the Church & Dwight investment was worth $5,822 on December 31, Patrick D. de Maynadier Executive Vice President, 2015, whereas the S&P 500 investment was worth only $1,673. That General Counsel and Secretary signifi cant difference in investment refl ects the work of an experienced management team that is never satisfi ed with the status quo. P. 2 Church & Dwight Co., Inc. 2015 Annual Report 47369.indd 2 3/23/16 3:45 PM Stockholder Letter Our TSR is the result of 10 key drivers (3) Ferociously defend our brands We consistently deliver strong TSR by continuing to Despite being a relatively small player in the CPG focus on 10 key drivers that are the “secret sauce” to industry, we have defended, and will continue to our success: aggressively defend, our brands when they are challenged by larger competitors. Most of our expert (1) Recession resilient product portfolio management team started their careers by working Church & Dwight’s diverse consumer product for larger CPG companies and, as a result, they know portfolio, consisting of both premium (60%) and how to compete, and win, when challenged. value (40%) brands, enables us to succeed in various economic environments. We believe no other consumer (4) Drive international growth packaged goods (CPG) company has such a well- Over the past 15 years, we have transformed ourselves balanced portfolio of both premium and value brands. from a U.S. business to a global player with approximately We are maintaining strong marketing spending and 18% of our sales in foreign countries. We have fully launching innovative new products to support our operational subsidiaries in 6 countries (U.K., France, premium and value brands to deliver increased Canada, Mexico, Australia and Brazil) and export to over sales and profi ts and higher market share. We aim to 80 other countries. Our Consumer International team continue to leverage our recession-resilient product has delivered outstanding growth over the past 6 years portfolio to drive continuous strong earnings growth with Net Sales increases averaging 4.1% annually and in the ever-changing economic environment. Operating Profi t increases averaging over 5.2% annually. (2) Build Power Brand shares (5) Focus on gross margin While we sell over 80 brands, 10 of these brands generate Gross margin expansion fuels our organic growth over 80% of our revenues and profi ts. These 10 brands, because it enables us to increase marketing spending. which we call our “Power Brands,” are ARM & HAMMER, Our gross margin grew by 40 basis points in 2015. In TROJAN, OXICLEAN, L’IL CRITTERS and VITAFUSION 2016, we expect to expand gross margin and to build (VMS), XTRA, FIRST RESPONSE, SPINBRUSH, ORAJEL, upon the 1,540 basis point gross margin increase NAIR, and our newest Power Brand, BATISTE. All 10 achieved between 2001 and 2015. Driving higher gross Power Brands are market leaders. In 2015, our business margin through productivity improvements, launching teams did an outstanding job in driving revenue and higher margin new products and buying margin accretive profi t growth on seven of our 10 Power Brands through businesses continues to be our formula for the future.