{ "docId": "019dd923-622c-750b-8b98-c3e7825e1948", "docSlug": "8b6a62f49fba", "documentTitle": "Church & Dwight Co., Inc. (CHD)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-09-05 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 81, "pageCount": 92, "prevPage": 80, "nextPage": 82, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "dense", "nDataPoints": 8, "notes": "The slide uses two distinct callout boxes to contrast management's stated targets with the activist's critique of the underlying methodology.", "elementsJson": [ "headline_text", "paragraph", "callout_box", "bullet_list" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-c3e7825e1948/81", "deckHref": "/decks/019dd923-622c-750b-8b98-c3e7825e1948", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-c3e7825e1948.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-c3e7825e1948#slide-81", "components": [ { "bbox": { "h": 0.17, "w": 0.225, "x": 0.035, "y": 0.375 }, "kind": "callout", "text": "Net Sales Target Does Not Capture Organic Growth Value Creation By Management", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "05998176-af10-4bf8-9f5d-40596170d96b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.17, "w": 0.225, "x": 0.035, "y": 0.635 }, "kind": "callout", "text": "Diluted EPS Rewards Management For Repurchasing Stock At Inflated Prices", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a15c81a8-482c-4635-83e4-ead3f10c74b1", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "Management has not demonstrated it is a disciplined acquirer of businesses, nor should it be rewarded for overpaying for its own stock to boost EPS.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-1ac2-71b6-bf56-c19cac91cae0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.17, "w": 0.7, "x": 0.28, "y": 0.375 }, "kind": "list", "text": "In 2018, acquisitions contributed 5.4% to growth out of 9.8% total (55 %)\nManagement has proven to be poor acquirers, deal-makers, and pay large premiums for targets:\nRecent impairment of Natronx, and earn-out reversals of Passport and Agro Bioscience\nShareholders should demand management be paid on organic growth and not net sales targets", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "26da0edb-05a3-4995-897a-795bc4d8198d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.3, "w": 0.7, "x": 0.28, "y": 0.635 }, "kind": "list", "text": "CHD repurchased $1 billion of stock from 2016 – 2018, including $200m in 2018\nShares repurchased in 2018 reduced the share count by 4.1m\nWe estimate the net benefit from share repurchases was $0.03\n$0.04 of repurchase benefit, less $0.01 of incremental interest that would have been earned on the cash, assuming 1% interest on short-term investments\nRepurchases can be an effective strategy for value creation when shares are undervalued, or to prevent dilution from exercising of options by employees\nHowever, CHD’s shares are expensive and trade at a premium to peers. Shares issued to employees have been approximately 0.7 – 0.9m per annum, thus buybacks are not merely to offset dilution", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "2863cabd-def1-4a87-9238-afcaeba5dc60", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.96, "x": 0.02, "y": 0.195 }, "kind": "paragraph", "text": "A closer look at key targets used to pay management its annual bonus reveal significant analytical shortfalls in the methodology. The Compensation Committee, and shareholders, should demand that Net Sales be adjusted for acquisitions, and Diluted EPS be adjusted for share repurchases. Management has not demonstrated it is a disciplined acquirer of businesses, nor should it be rewarded for overpaying for its own stock to boost EPS.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0b68225b-cce9-4e12-8dfe-bc30ca27e989", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.31, "y": 0.02 }, "kind": "title", "text": "Spruce Point Has Even Broader Concerns About Bonus Targets", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b76c0c31-af73-4373-bc85-1220222f088b", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "2ad087e4-9bdc-4fe5-9f1a-a06050c23972", "evidence": "The slide explicitly critiques the methodology of management compensation to expose potential value destruction.", "confidence": 0.8 } ], "arcBeats": [], "loops": [ { "to": 92, "from": 1, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "d8d41695-ad33-43d2-9478-d227476d9e68", "evidence": "The overall thesis implies that failing to act on Spruce Point's analysis could lead to significant financial losses for investors holding onto CHD stock.", "position": 2, "objective": "The cost of not selling CHD", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.6, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }