CHURCH & DWIGHT CO INC /DE/ - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10585

CHURCH & DWIGHT CO., INC.

(Exact name of registrant as specified in its charter)

Delaware

13-4996950

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

500 Charles Ewing Boulevard, Ewing, NJ 08628

(Address of principal executive offices)

Registrant’s telephone number, including area code: (609) 806-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common Stock, $1 par value

CHD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2021, there were 244,148,366 shares of Common Stock outstanding.

TABLE OF CONTENTS

PART I

Item		Page
1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

3.	Quantitative and Qualitative Disclosures about Market Risk	29

4.	Controls and Procedures	29

PART II

1.	Legal Proceedings	31

1A.	Risk Factors	31

2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

6.	Exhibits	33

PART I – FINANCIAL INFORMATION

ITEM 1:

FINANCIAL STATEMENTS

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2021			2020			2021			2020
Net Sales	$	1,311.4		$	1,241.0		$	3,821.4		$	3,600.5
Cost of sales		732.2			675.8			2,139.1			1,943.7
Gross Profit		579.2			565.2			1,682.3			1,656.8
Marketing expenses		160.9			170.9			376.6			389.6
Selling, general and administrative expenses		116.9			120.5			403.0			428.1
Income from Operations		301.4			273.8			902.7			839.1
Equity in earnings of affiliates		2.0			1.9			7.4			5.5
Investment earnings, net		0.0			0.0			0.1			0.4
Other income (expense), net		(0.7	)		(0.3	)		(1.1	)		(1.1	)
Interest expense		(13.4	)		(13.9	)		(41.5	)		(47.0	)
Income before Income Taxes		289.3			261.5			867.6			796.9
Income taxes		58.9			45.3			198.2			161.2
Net Income	$	230.4		$	216.2		$	669.4		$	635.7

Weighted average shares outstanding - Basic		245.3			247.7			245.2			246.5
Weighted average shares outstanding - Diluted		249.8			253.3			249.9			252.0
Net income per share - Basic	$	0.94		$	0.87		$	2.73		$	2.58
Net income per share - Diluted	$	0.92		$	0.85		$	2.68		$	2.52
Cash dividends per share	$	0.25		$	0.24		$	0.76		$	0.72

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,			September 30,
	2021			2020		2021			2020
Net Income	$	230.4		$	216.2	$	669.4		$	635.7
Other comprehensive income, net of tax:
Foreign exchange translation adjustments		(5.1	)		6.2		(4.7	)		(0.4	)
Defined benefit plan adjustments gain (loss)	0.0			0.0			(0.7	)	0.0
Income (loss) from derivative agreements		10.0			1.3		22.1			(23.7	)
Other comprehensive income (loss)		4.9			7.5		16.7			(24.1	)
Comprehensive income	$	235.3		$	223.7	$	686.1		$	611.6

See Notes to Condensed Consolidated Financial Statements (Unaudited).

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except share and per share data)

	September 30,			December 31,
	2021			2020
Assets
Current Assets
Cash and cash equivalents	$	180.0		$	183.1
Accounts receivable, less allowances of $3.1 and $3.7		407.0			398.8
Inventories		552.7			495.4
Other current assets		37.1			35.1
Total Current Assets		1,176.8			1,112.4

Property, Plant and Equipment, Net		615.8			612.8
Equity Investment in Affiliates		9.0			9.1
Trade Names and Other Intangibles, Net		3,018.8			3,110.2
Goodwill		2,230.6			2,229.6
Other Assets		331.0			340.4
Total Assets	$	7,382.0		$	7,414.5

Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings	$	279.7		$	351.4
Current portion of long-term debt		299.6			0.0
Accounts payable and accrued expenses		997.7			1,024.5
Income taxes payable		7.4			12.7
Total Current Liabilities		1,584.4			1,388.6

Long-term Debt		1,214.8			1,812.5
Deferred Income Taxes		747.7			707.3
Deferred and Other Long-term Liabilities		301.5			367.7
Business Acquisition Liabilities		20.0			118.0
Total Liabilities		3,868.4			4,394.1

Commitments and Contingencies
Stockholders' Equity
Preferred Stock, $1.00 par value, Authorized 2,500,000 shares; none issued		0.0			0.0
Common Stock, $1.00 par value, Authorized 600,000,000 shares and 292,855,100 shares issued as of September 30, 2021 and December 31, 2020		292.8			292.8
Additional paid-in capital		327.9			274.4
Retained earnings		5,269.6			4,786.0
Accumulated other comprehensive loss		(60.9	)		(77.6	)
Common stock in treasury, at cost: 47,857,411 shares as of September 30, 2021 and 47,494,982 shares as of December 31, 2020		(2,315.8	)		(2,255.2	)
Total Stockholders' Equity		3,513.6			3,020.4
Total Liabilities and Stockholders' Equity	$	7,382.0		$	7,414.5

See Notes to Condensed Consolidated Financial Statements (Unaudited).

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(In millions)

	Nine Months Ended
	September 30,			September 30,
	2021			2020
Cash Flow From Operating Activities
Net Income	$	669.4		$	635.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		51.3			48.4
Amortization expense		113.6			90.5
Change in fair value of business acquisition liabilities		(98.0	)		(71.7	)
Deferred income taxes		32.8			28.0
Equity in net earnings of affiliates		(7.4	)		(5.5	)
Distributions from unconsolidated affiliates		7.5			5.8
Non-cash compensation expense		20.3			18.7
Gain on sale of assets		0.0			(3.0	)
Other		5.8			1.4
Change in assets and liabilities:
Accounts receivable		(12.0	)		(18.1	)
Inventories		(59.9	)		(82.3	)
Other current assets		6.1			(4.1	)
Accounts payable and accrued expenses		(50.8	)		140.1
Income taxes payable		(10.3	)		13.1
Other operating assets and liabilities, net		(14.8	)		1.2
Net Cash Provided By Operating Activities		653.6			798.2
Cash Flow From Investing Activities
Additions to property, plant and equipment		(64.1	)		(54.6	)
Proceeds from sale of assets		0.0			7.0
Other		(5.6	)		(3.6	)
Net Cash Used In Investing Activities		(69.7	)		(51.2	)
Cash Flow From Financing Activities
Long-term debt (repayments)		(300.0	)		0.0
Short-term debt (repayments), net of borrowings		(71.6	)		(250.4	)
Proceeds from stock options exercised		26.9			89.1
Payment of cash dividends		(185.8	)		(177.7	)
Purchase of treasury stock		(54.9	)		0.0
Payment of business acquisition liabilities		0.0			(14.5	)
Deferred financing and other		0.0			(0.2	)
Net Cash Used In Financing Activities		(585.4	)		(353.7	)
Effect of exchange rate changes on cash and cash equivalents		(1.6	)		0.1
Net Change In Cash and Cash Equivalents		(3.1	)		393.4
Cash and Cash Equivalents at Beginning of Period		183.1			155.7
Cash and Cash Equivalents at End of Period	$	180.0		$	549.1

See Notes to Condensed Consolidated Financial Statements (Unaudited).

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW-CONTINUED

(Unaudited)

(In millions)

	Nine Months Ended
	September 30,		September 30,
	2021		2020
Cash paid during the period for:
Interest (net of amounts capitalized)	$	45.4	$	52.0
Income taxes	$	175.7	$	120.0
Supplemental disclosure of non-cash investing activities:
Property, plant and equipment expenditures included in Accounts Payable	$	11.2	$	15.4

See Notes to Condensed Consolidated Financial Statements (Unaudited).

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In millions)

	Number of Shares					Amounts
	Common Stock		Treasury Stock			Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders' Equity
December 31, 2019		292.8		(47.4	)	$	292.8	$	295.5		$	4,237.4		$	(66.7	)	$	(2,091.2	)	$	2,667.8
Net income		0.0		0.0			0.0		0.0			229.8			0.0			0.0			229.8
Other comprehensive income (loss)		0.0		0.0			0.0		0.0			0.0			(32.7	)		0.0			(32.7	)
Cash dividends		0.0		0.0			0.0		0.0			(59.0	)		0.0			0.0			(59.0	)
Stock based compensation expense and stock option plan transactions		0.0		0.3			0.0		0.2			0.0			0.0			11.7			11.9
March 31, 2020		292.8		(47.1	)	$	292.8	$	295.7		$	4,408.2		$	(99.4	)	$	(2,079.5	)	$	2,817.8
Net income		0.0		0.0			0.0		0.0			189.7			0.0			0.0			189.7
Other comprehensive income (loss)		0.0		0.0			0.0		0.0			0.0			1.1			0.0			1.1
Cash dividends		0.0		0.0			0.0		0.0			(59.1	)		0.0			0.0			(59.1	)
Stock based compensation expense and stock option plan transactions		0.0		1.2			0.0		7.1			0.0			0.0			42.2			49.3
June 30, 2020		292.8		(45.9	)	$	292.8	$	302.8		$	4,538.8		$	(98.3	)	$	(2,037.3	)	$	2,998.8
Net income		0.0		0.0			0.0		0.0			216.2			0.0			0.0			216.2
Other comprehensive income (loss)		0.0		0.0			0.0		0.0			0.0			7.5			0.0			7.5
Cash dividends		0.0		0.0			0.0		0.0			(59.6	)		0.0			0.0			(59.6	)
Stock based compensation expense and stock option plan transactions		0.0		1.4			0.0		(0.8	)		0.0			0.0			48.2			47.4
September 30, 2020		292.8		(44.5	)	$	292.8	$	302.0		$	4,695.4		$	(90.8	)	$	(1,989.1	)	$	3,210.3

	Number of Shares					Amounts
	Common Stock		Treasury Stock			Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders' Equity
December 31, 2020		292.8		(47.4	)	$	292.8	$	274.4	$	4,786.0		$	(77.6	)	$	(2,255.2	)	$	3,020.4
Net income		0.0		0.0			0.0		0.0		220.7			0.0			0.0			220.7
Other comprehensive income (loss)		0.0		0.0			0.0		0.0		0.0			23.0			0.0			23.0
Cash dividends		0.0		0.0			0.0		0.0		(61.9	)		0.0			0.0			(61.9	)
Stock purchases		0.0		(0.4	)		0.0		30.0		0.0			0.0			(30.0	)		0.0
Stock based compensation expense and stock option plan transactions		0.0		0.1			0.0		1.8		0.0			0.0			7.2			9.0
March 31, 2021		292.8		(47.7	)	$	292.8	$	306.2	$	4,944.8		$	(54.6	)	$	(2,278.0	)	$	3,211.2
Net income		0.0		0.0			0.0		0.0		218.3			0.0			0.0			218.3
Other comprehensive income (loss)		0.0		0.0			0.0		0.0		0.0			(11.2	)		0.0			(11.2	)
Cash dividends		0.0		0.0			0.0		0.0		(61.9	)		0.0			0.0			(61.9	)
Stock based compensation expense and stock option plan transactions		0.0		0.2			0.0		14.3		0.0			0.0			6.5			20.8
June 30, 2021		292.8		(47.5	)	$	292.8	$	320.5	$	5,101.2		$	(65.8	)	$	(2,271.5	)	$	3,377.2
Net income		0.0		0.0			0.0		0.0		230.4			0.0			0.0			230.4
Other comprehensive income (loss)		0.0		0.0			0.0		0.0		0.0			4.9			0.0			4.9
Cash dividends		0.0		0.0			0.0		0.0		(62.0	)		0.0			0.0			(62.0	)
Stock purchases		0.0		(0.7	)		0.0		0.0		0.0			0.0			(54.9	)		(54.9	)
Stock based compensation expense and stock option plan transactions		0.0		0.3			0.0		7.4		0.0			0.0			10.6			18.0
September 30, 2021		292.8		(47.9	)	$	292.8	$	327.9	$	5,269.6		$	(60.9	)	$	(2,315.8	)	$	3,513.6

See Notes to Condensed Consolidated Financial Statements (Unaudited).

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In millions, except per share data)

1.	Basis of Presentation

These condensed consolidated financial statements have been prepared by Church & Dwight Co., Inc. (the “Company”). In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for all periods presented have been made. Results of operations for interim periods may not be representative of results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”).

The Company incurred research and development expenses in the third quarter of 2021 and 2020 of $27.7 and $27.0, respectively. The Company incurred research and development expenses in the first nine months of 2021 and 2020 of $77.2 and $73.3, respectively. These expenses are included in selling, general and administrative (“SG&A”) expenses.

2.	New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued new accounting guidance intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance was effective beginning on March 12, 2020, and the Company may apply the amendments prospectively to contract modifications made or relationships entered into or evaluated through December 31, 2022. The adoption of this guidance did not have an impact on the Company’s consolidated financial position, results of operations or cash flows in the current period. The Company will continue to evaluate the impacts of this guidance on future contract modifications through December 31, 2022.

There have been no other accounting pronouncements issued but not yet adopted by the Company which are expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

3.	Inventories

Inventories consist of the following:

	September 30,		December 31,
	2021		2020
Raw materials and supplies	$	117.1	$	112.9
Work in process		41.1		33.0
Finished goods		394.5		349.5
Total	$	552.7	$	495.4

4.	Property, Plant and Equipment, Net (“PP&E”)

PP&E consists of the following:

	September 30,		December 31,
	2021		2020
Land	$	28.3	$	28.3
Buildings and improvements		277.3		265.3
Machinery and equipment		823.5		793.4
Software		108.3		103.0
Office equipment and other assets		85.8		85.1
Construction in progress		84.0		86.8
Gross PP&E		1,407.2		1,361.9
Less accumulated depreciation and amortization		791.4		749.1
Net PP&E	$	615.8	$	612.8

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Depreciation expense on PP&E	$	17.2	$	16.4	$	51.3	$	48.4

5.	Earnings Per Share (“EPS”)

Basic EPS is calculated based on income available to holders of the Company’s common stock (“Common Stock”) and the weighted average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential Common Stock issuable pursuant to the exercise of outstanding stock options.

The following table sets forth a reconciliation of the weighted average number of shares of Common Stock outstanding to the weighted average number of shares outstanding on a diluted basis:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Weighted average common shares outstanding - basic		245.3		247.7		245.2		246.5
Dilutive effect of stock options		4.5		5.6		4.7		5.5
Weighted average common shares outstanding - diluted		249.8		253.3		249.9		252.0
Antidilutive stock options outstanding		1.6		0.0		1.6		1.5

6.	Stock Based Compensation Plans

The following table provides a summary of option activity:

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
				Exercise		Term		Intrinsic
	Options			Price		(in Years)		Value
Outstanding at December 31, 2020		12.7		$	50.72
Granted		1.5			84.75
Exercised		(0.6	)		40.03
Cancelled		(0.1	)		72.65
Outstanding at September 30, 2021		13.5		$	54.95		5.7	$	374.9
Exercisable at September 30, 2021		8.6		$	41.99		4.0	$	350.0

The following table provides information regarding the intrinsic value of stock options exercised and stock compensation expense related to stock option awards:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Intrinsic Value of Stock Options Exercised	$	12.0	$	84.7	$	30.8	$	153.6
Stock Compensation Expense Related to Stock Option Awards	$	3.4	$	2.9	$	19.9	$	18.3
Issued Stock Options		0.0		0.0		1.5		1.8
Weighted Average Fair Value of Stock Options issued (per share)	$	0.0	$	0.0	$	17.33	$	12.75
Fair Value of Stock Options Issued	$	0.0	$	0.0	$	26.1	$	23.8

The following table provides a summary of the assumptions used in the valuation of issued stock options:

	Three Months Ended		Nine Months Ended
	September 30,	September 30,	September 30,			September 30,
	2021	2020	2021			2020
Risk-free interest rate	-	-		1.3	%		0.5	%
Expected life in years	-	-		7.2			7.3
Expected volatility	-	-		20.7	%		19.8	%
Dividend yield	-	-		1.2	%		1.3	%

7.Share Repurchases

On November 1, 2017, the Board authorized a share repurchase program, under which the Company may repurchase up to $500.0 in shares of Common Stock (the “2017 Share Repurchase Program”). The 2017 Share Repurchase Program does not have an expiration. The Company also continued its evergreen share repurchase program, authorized by the Board on January 29, 2014, under which the Company may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under the Company’s incentive plans.

In December 2020, the Company entered into an accelerated share repurchase (“ASR”) contract with a commercial bank to purchase Common Stock. The Company paid $300.0 to the bank, inclusive of fees, and received an initial delivery of shares equal to $270.0, or 3.1 million shares. The Company used cash on hand and short-term borrowings to fund the initial purchase price. Upon the completion of the ASR, which ended in February 2021, the bank delivered an additional 0.4 million shares to the Company. The final shares delivered to the Company were determined by the average price per share paid by the bank during the purchase period. All 3.5 million shares were purchased under the Company’s evergreen program.

In August 2021, the Company executed an agreement to purchase up to $200.0 of its Common Stock through October 31, 2021. During the quarter the Company purchased 0.7 million shares for approximately $55.0, inclusive of fees, all of which was purchased under the 2017 Share Repurchase Program. In October 2021, as of the filing date of this Quarterly Report on Form 10-Q, the Company purchased an additional 0.9 million shares for approximately $75.0. The 2017 Share Repurchase Program was replaced in the fourth quarter of 2021. See Note 19 for further details.

8.Fair Value Measurements

The following table presents the carrying amounts and estimated fair values of the Company’s other financial instruments at September 30, 2021 and December 31, 2020:

		September 30, 2021				December 31, 2020
	Input	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial Assets:
Cash equivalents	Level 1	$	15.8	$	15.8	$	73.7	$	73.7
Financial Liabilities:
Short-term borrowings	Level 2		279.7		279.7		351.4		351.4
Term loan due May 1, 2022	Level 2		0.0		0.0		300.0		300.0
2.45% Senior notes due August 1, 2022	Level 2		299.9		305.2		299.9		310.1
2.875% Senior notes due October 1, 2022	Level 2		400.0		410.1		399.9		416.6
3.15% Senior notes due August 1, 2027	Level 2		424.7		470.4		424.7		472.4
3.95% Senior notes due August 1, 2047	Level 2		397.5		468.2		397.4		502.2
Interest Rate Swap Lock Agreement liability	Level 2		39.8		39.8		57.0		57.0
Business Acquisition Liabilities	Level 3		20.0		20.0		118.0		118.0

The Company recognizes transfers between input levels as of the actual date of the event. There were no transfers between input levels during the nine months ended September 30, 2021.

Refer to Note 2 in the Form 10-K for a description of the methods and assumptions used to estimate the fair value of each class of financial instruments reflected in the condensed consolidated balance sheets.

The business acquisition liabilities represent the estimated fair value of additional future contingent consideration payable for acquisitions of businesses that included contingent consideration clauses. The fair value of the business acquisition liabilities is evaluated on an ongoing basis and is based on management estimates and entity-specific assumptions which are considered Level 3 inputs. In the nine months ended September 30, 2021, the Company recorded a reduction in fair value of $98.0 for the Flawless business acquisition liability (as defined in Note 10) based on the revised valuation due to updated sales forecasts. The $98.0 reduction of the business acquisition liability was recorded as a reduction in SG&A expense within the Consumer Domestic and Consumer International segments. At both September 30, 2021 and December 31, 2020, the Company had a business acquisition liability of $20.0 in connection with the Zicam Acquisition (as defined in Note 10). Any amount that may be due for the Zicam business acquisition liability is payable five years from the closing.

The Company has entered into interest rate swap lock agreements (“Interest Rate Swap Lock Agreements”) which are used to hedge the risk of changes in the interest payments attributable to changes in the benchmark U.S. Dollar LIBOR interest rate associated with anticipated issuances of debt in 2022. The liability decreased by $17.2 during the first nine months of 2021 primarily due to higher current and projected interest rates with the offset in Accumulated Other Comprehensive Loss and Deferred Taxes. The liability was reclassified to Accounts Payable and Accrued Expenses during the third quarter of 2021.

The carrying amounts of Accounts Receivable, and Accounts Payable and Accrued Expenses, approximated estimated fair values as of September 30, 2021 and December 31, 2020.

9.	Derivative Instruments and Risk Management

Changes in interest rates, foreign exchange rates, the price of the Common Stock and commodity prices expose the Company to market risk. The Company manages these risks by the use of derivative instruments, such as cash flow and fair value hedges, diesel and commodity hedge contracts, equity derivatives and foreign exchange forward contracts. The Company does not use derivatives for trading or speculative purposes. Refer to Note 3 in the Form 10-K for a discussion of each of the Company’s derivative instruments in effect as of December 31, 2020.

The notional amount of a derivative instrument is the nominal or face amount used to calculate payments made on that instrument. Notional amounts are presented in the following table:

	Notional		Notional
	Amount		Amount
	September 30, 2021		December 31, 2020
Derivatives designated as hedging instruments
Foreign exchange contracts	$	212.0	$	252.7
Interest rate swap lock	$	300.0	$	300.0
Diesel fuel contracts	1.7 gallons		6.7 gallons
Commodities contracts	49.1 pounds		84.0 pounds
Derivatives not designated as hedging instruments
Foreign exchange contracts	$	5.9	$	8.0
Equity derivatives	$	27.2	$	23.3

Excluding the Interest Rate Swap Lock Agreements disclosed in Note 8, the fair values and amount of gain (loss) recognized in income and Other Comprehensive Income (“OCI”) associated with the derivative instruments disclosed above did not have a material impact on the Company’s condensed consolidated financial statements during the three and nine months ended September 30, 2021.

10.	Acquisitions

On December 1, 2020, the Company acquired all of the outstanding equity of Consumer Health Holdco LLC, the owner of the ZICAM® brand and cold remedy products business (the “Zicam Acquisition”). The Company paid $512.7, net of cash acquired, at closing and deferred an additional cash payment of $20.0 related to certain indemnifications provided by the seller. The deferred amount is recorded in Business Acquisition Liabilities on the condensed consolidated balance sheet and any amount that may be due for the business acquisition liability is payable five years from the closing. Zicam’s annual net sales for the year ended December 31, 2020 were approximately $107.0. The acquisition was financed by the Company with a combination of cash on hand and short-term borrowings. The ZICAM business is managed in the Consumer Domestic segment.

The fair values of the net assets at acquisition are set forth as follows:

Inventory and other working capital	$	40.2
Property, plant and equipment		0.5
Trade name		367.8
Other intangible assets		93.8
Goodwill		152.2
Current liabilities		(13.1	)
Deferred income taxes		(108.0	)
Long-term liabilities		(20.7	)
Cash purchase price (net of cash acquired)	$	512.7

The trade names and other intangible assets were valued using a discounted cash flow model. All of the intangible assets recognized from the Zicam Acquisition have a useful life which ranges from 10 - 20 years. The goodwill is a result of expected synergies from combined operations of the acquired business and the Company. Pro forma results are not presented because the impact of the acquisition is not material to the Company’s consolidated financial results. The goodwill and other intangible assets associated with the Zicam Acquisition are not deductible for U.S. tax purposes.

On May 1, 2019, the Company closed on its previously announced acquisition of the FLAWLESS® business (the “Flawless Acquisition”) from Ideavillage Products Corporation (“Ideavillage”). The Company paid $475.0 at closing and agreed to make an additional business acquisition liability payment based on a trailing twelve-month net sales target ending no later than December 31, 2021. At September 30, 2021 the business acquisition liability value was $0.0. The Company does not expect to make a payment for

the Flawless business acquisition liability. The transaction was funded with a three-year term loan and commercial paper borrowings. There was a six-month integration transition period in which the net cash received from Ideavillage was accounted for as other revenue as a component of net sales. The Company purchased the inventory as part of the acquisition following the transition period, and at such time the Company became the principal party to the sales transactions and began recording revenue on a gross basis. The FLAWLESS business is managed in the Consumer Domestic and Consumer International segments and represents an addition to the Company’s specialty haircare portfolio which includes BATISTE® dry shampoo, VIVISCAL hair thinning supplements, and TOPPIK® hair fibers.

The fair values of the net assets at acquisition are set forth as follows:

Trade name	$	447.3
Other intangible assets		121.8
Goodwill		87.9
Contingent consideration		(182.0	)
Cash purchase price	$	475.0

As a result of the Company purchasing assets, the goodwill and other intangible assets associated with the Flawless Acquisition are deductible for U.S. tax purposes. The trade names and other intangible assets were valued using a discounted cash flow model. All of the intangible assets recognized from the Flawless Acquisition have a useful life which ranges from 15 - 20 years. The goodwill is a result of expected synergies from combined operations of the acquired business and the Company. Pro forma results are not presented because the impact of the acquisition was not material to the Company’s consolidated financial results. Ideavillage will continue to help support the business through a separate transition services agreement which expires on December 31, 2021.

11.	Goodwill and Other Intangibles, Net

The following table provides information related to the carrying value of all intangible assets, other than goodwill:

	September 30, 2021								December 31, 2020
	Gross							Amortization	Gross
	Carrying		Accumulated					Period	Carrying		Accumulated
	Amount		Amortization			Net		(Years)	Amount		Amortization			Net
Amortizable intangible assets:
Trade Names	$	1,388.9	$	(320.3	)	$	1,068.6	3-20	$	1,389.6	$	(269.6	)	$	1,120.0
Customer Relationships		659.5		(320.2	)		339.3	15-20		659.5		(291.2	)		368.3
Patents/Formulas		230.5		(95.9	)		134.6	4-20		230.5		(85.3	)		145.2
Total	$	2,278.9	$	(736.4	)	$	1,542.5		$	2,279.6	$	(646.1	)	$	1,633.5

Indefinite Lived Intangible Assets - Gross Carrying Amount

	September 30,		December 31,
	2021		2020
Trade Names	$	1,476.3	$	1,476.7

Intangible amortization expense was $29.9 and $24.4 for the third quarter of 2021 and 2020, respectively. Intangible amortization expense amounted to $90.9 and $73.4 for the first nine months of 2021 and 2020, respectively. The Company estimates that intangible amortization expense will be approximately $120.0 in 2021 and approximately $116.0 to $107.0 annually over the next five years.

Fair value for indefinite lived intangible assets was estimated based on a “relief from royalty” or “excess earnings” discounted cash flow method, which contains numerous variables that are subject to change as business conditions change, and therefore could impact fair values in the future. The key assumptions used in determining fair value are sales growth, profitability margins, tax rates and discount rates. The Company determined that the fair value of all indefinite lived intangible assets for each of the years in the three-year period ended December 31, 2020 exceeded their respective carrying values based upon the forecasted cash flows and profitability. The Company’s indefinite lived intangible impairment review is completed in the fourth quarter of each year.

In recent years the Company’s TROJAN® business, specifically the condom category, has not grown and competition has increased. Social distancing requirements due to the COVID-19 pandemic have further negatively impacted the business. As a result, the TROJAN business has experienced stagnant sales and profits resulting in a reduction in expected future cash flows which has eroded a portion of the excess between the fair and carrying value of the tradename. This indefinite-lived intangible asset is susceptible to impairment risk and a continued decline in fair value could trigger a future impairment charge of the TROJAN tradename. The carrying value of the TROJAN tradename is $176.4 and fair value exceeded carrying value by 53% as of December 31, 2020. The key assumptions used in the projections from the Company’s October 1, 2020 impairment analysis include discount rates of 7.0% in the U.S. and 9.0% internationally, growth assumptions commensurate with its outlook for the brand and the category based on recent trends, and an average royalty rate of approximately 10%. These discount rates were reduced by 250 basis points from the October 1, 2019 impairment analysis to reflect the inherent reduction in the risk profile of the Company.

While management can and has implemented strategies to address the risk, including lowering the Company’s production costs, investing in new product ideas, and developing new creative advertising, significant changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair value. More recently, the category is experiencing a recovery, benefiting from an easing of COVID-19 social restrictions leading to an increase in sexual activity. The Company expects this trend will continue into next year with the continued adoption of vaccines and reduction of social distancing restrictions.

In addition, the Company’s Passport Food Safety business, under pressure as a result of the COVID-19 pandemic and new competitive activities, is experiencing sales and profit declines due to decreased demand for its products that could result in an impairment of the associated tradename and other intangible assets. The assets have a current net book value of approximately $21.0 and are being amortized over their remaining weighted average life of 11 years. The Company is implementing strategies to address the decline. However, if unsuccessful, this decline could trigger a future impairment charge.

The carrying amount of goodwill is as follows:

	Consumer		Consumer		Specialty
	Domestic		International		Products		Total
Balance at December 31, 2020	$	1,859.3	$	234.3	$	136.0	$	2,229.6
Zicam adjustment		1.0		0.0		0.0		1.0
Balance at September 30, 2021	$	1,860.3	$	234.3	$	136.0	$	2,230.6

The result of the Company’s annual goodwill impairment test, performed in the beginning of the second quarter of 2021, determined that the estimated fair value substantially exceeded the carrying values of all reporting units. The determination of fair value contains numerous variables that are subject to change as business conditions change and therefore could impact fair value in the future. The Company has never incurred a goodwill impairment charge.

12.

Leases

The Company leases certain manufacturing facilities, warehouses, office space, railcars and equipment. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. All recorded leases are classified as operating leases and lease expense is recognized on a straight-line basis over the lease term. For leases beginning in 2019, lease components (base rental costs) are accounted for separately from the nonlease components (e.g., common-area maintenance costs). For leases that do not provide an implicit rate, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

A summary of the Company’s lease information is as follows:

		September 30,			December 31,
	Classification	2021			2020
Assets
Right of use assets	Other Assets	$	166.7		$	181.6

Liabilities
Current lease liabilities	Accounts Payable and Accrued Expenses	$	24.9		$	25.0
Long-term lease liabilities	Deferred and Other Long-term Liabilities		153.5			168.3
Total lease liabilities		$	178.4		$	193.3

Other information
Weighted-average remaining lease term (years)			9.2			9.7
Weighted-average discount rate			4.3	%		4.3	%

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Statement of Income
Lease cost⁽¹⁾	$	8.1	$	6.6	$	24.6	$	20.0

Other information
Leased assets obtained in exchange for new lease liabilities net of modifications⁽²⁾	$	0.4	$	2.2	$	4.5	$	18.7
Cash paid for amounts included in the measurement of lease liabilities	$	8.0	$	6.3	$	24.5	$	18.9

⁽¹⁾

Lease expense is included in cost of sales or SG&A expenses based on the nature of the leased item. Short-term lease expense is excluded from this amount and is not material. The Company also has certain variable leases which are not material. The non-cash component of lease expense for the first nine months of 2021 and 2020 was $19.1 and $14.4, respectively, and is included in the Amortization caption in the condensed consolidated statement of cash flows.

⁽²⁾

In March 2020, the Company approved a capital project to purchase additional machinery and equipment at one of its leased manufacturing facilities. This led to a lease modification to include a renewal option that would extend the lease for an additional five years through 2029. The modification resulted in an increase to the Company’s right of use assets and corresponding lease liabilities of approximately $7.3 recorded in the first quarter of 2020.

The Company’s minimum annual rentals including reasonably assured renewal options under lease agreements are as follows:

	Operating
	Leases
2021	$	8.1
2022		31.0
2023		26.8
2024		24.4
2025		23.0
2026 and thereafter		106.6
Total future minimum lease commitments		219.9
Less: Imputed interest		(41.5	)
Present value of lease liabilities	$	178.4

13.	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	September 30,		December 31,
	2021		2020
Trade accounts payable	$	617.5	$	588.1
Accrued marketing and promotion costs		170.6		177.8
Accrued wages and related benefit costs		56.3		124.2
Other accrued current liabilities		153.3		134.4
Total	$	997.7	$	1,024.5

14.	Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt consist of the following:

	September 30,			December 31,
	2021			2020
Short-term borrowings
Commercial paper issuances	$	279.7		$	349.0
Various debt due to international banks		0.0			2.4
Total short-term borrowings	$	279.7		$	351.4

Long-term debt
Term loan due May 1, 2022⁽¹⁾		0.0			300.0
2.45% Senior notes due August 1, 2022		300.0			300.0
Less: Discount		(0.1	)		(0.1	)
2.875% Senior notes due October 1, 2022		400.0			400.0
Less: Discount		0.0			(0.1	)
3.15% Senior notes due August 1, 2027		425.0			425.0
Less: Discount		(0.3	)		(0.3	)
3.95% Senior notes due August 1, 2047		400.0			400.0
Less: Discount		(2.5	)		(2.6	)
Debt issuance costs, net		(7.7	)		(9.4	)
Total long-term debt		1,514.4			1,812.5
Less: Current maturities		(299.6	)		0.0
Net long-term debt	$	1,214.8		$	1,812.5

⁽¹⁾

In June 2021, the Company repaid $100.0 principal of the $300.0 term loan due May 1, 2022, with the remaining $200.0 principal repaid in early July 2021. The term loan was repaid with proceeds from commercial paper borrowings and cash on hand.

15.	Accumulated Other Comprehensive Income (Loss)

The components of changes in accumulated other comprehensive income (loss) are as follows:

										Accumulated
	Foreign			Defined						Other
	Currency			Benefit			Derivative			Comprehensive
	Adjustments			Plans			Agreements			Income (Loss)
Balance at December 31, 2019	$	(36.8	)	$	0.0		$	(29.9	)	$	(66.7	)
Other comprehensive income (loss) before reclassifications		(0.4	)		0.0			(36.7	)		(37.1	)
Amounts reclassified to consolidated statement of income ^{(a) (b)}		0.0			0.0			4.1			4.1
Tax benefit (expense)		0.0			0.0			8.9			8.9
Other comprehensive income (loss)		(0.4	)		0.0			(23.7	)		(24.1	)
Balance at September 30, 2020	$	(37.2	)	$	0.0		$	(53.6	)	$	(90.8	)

Balance at December 31, 2020	$	(26.4	)	$	0.0		$	(51.2	)	$	(77.6	)
Other comprehensive income (loss) before reclassifications		(4.7	)		(0.9	)		32.4			26.8
Amounts reclassified to consolidated statement of income ^{(a) (b)}		0.0			0.0			(2.9	)		(2.9	)
Tax benefit (expense)		0.0			0.2			(7.4	)		(7.2	)
Other comprehensive income (loss)		(4.7	)		(0.7	)		22.1			16.7
Balance at September 30, 2021	$	(31.1	)	$	(0.7	)	$	(29.1	)	$	(60.9	)

(a)	Amounts reclassified to cost of sales, selling, general and administrative expenses or interest expense.

(b)	The Company reclassified a gain of $2.5 and a loss of $2.2 to the condensed consolidated statements of income during the three months ended September 30, 2021 and 2020, respectively.

16.Commitments, Contingencies and Guarantees

Commitments

a. The Company has a partnership with a supplier of raw materials that mines and processes sodium-based mineral deposits. The Company purchases the majority of its sodium-based raw material requirements from the partnership. The partnership agreement terminates upon two years’ written notice by either partner. Under the partnership agreement, the Company has an annual commitment to purchase 240,000 tons of sodium-based raw materials at the prevailing market price. The Company is not engaged in any other material transactions with the partnership or the partner supplier.

b. As of September 30, 2021, the Company had commitments of approximately $261.5. These commitments include the purchase of raw materials, packaging supplies and services from its vendors at market prices to enable the Company to respond quickly to changes in customer orders or requirements, as well as costs associated with licensing and promotion agreements.

c. As of September 30, 2021, the Company had various guarantees and letters of credit totaling $5.0.

d. In connection with the Flawless Acquisition, the Company is obligated to pay an additional amount based on sales performance through 2021. The initial fair value of this business acquisition liability was $182.0. That amount was established based on initial projections in the purchase price allocation. Since the initial fair value was established, the Company has recorded a reduction in fair value of the entire $182.0 business acquisition liability of which $41.0 and $98.0 was recorded in the three and nine months ended September 30, 2021, respectively, based on the revised valuation due to updated sales forecasts. The reduction in fair value was recorded as a reduction in SG&A expense within the Consumer Domestic and Consumer International segments. At September 30, 2021 the business acquisition liability value was $0.0. The Company does not expect to make a payment for the Flawless business acquisition liability.

In connection with the Zicam Acquisition, the Company deferred an additional cash payment of $20.0 related to certain indemnifications provided by the seller. Any amount that may be due is payable five years from the closing.

Legal proceedings

e. In addition, in conjunction with the Company’s acquisition and divestiture activities, the Company entered into select guarantees and indemnifications of performance with respect to the fulfillment of the Company’s commitments under applicable purchase and sale agreements. The arrangements generally indemnify the buyer or seller for damages associated with breach of contract, inaccuracies in representations and warranties surviving the closing date and satisfaction of liabilities and commitments retained under the applicable contract. Representations and warranties that survive the closing date generally survive for periods up to five years or the expiration of the applicable statutes of limitations. Potential losses under the indemnifications are generally limited to a portion of the original transaction price, or to other lesser specific dollar amounts for select provisions. With respect to sale transactions, the Company also routinely enters into non-competition agreements for varying periods of time. Guarantees and indemnifications with respect to acquisition and divestiture activities, if triggered, could have a materially adverse impact on the Company’s financial condition, results of operations and cash flows.

f. In addition to the matters described above, from time to time in the ordinary course of its business the Company is the subject of, or party to, various pending or threatened legal, regulatory or governmental actions or other proceedings, including, without limitation, those relating to, intellectual property, commercial transactions, product liability, purported consumer class actions, employment matters, antitrust, environmental, health, safety and other compliance related matters. Such proceedings are generally subject to considerable uncertainty and their outcomes, and any related damages, may not be reasonably predictable or estimable. Any such proceedings could result in a material adverse outcome negatively impacting the Company’s business, financial condition, results of operations or cash flows.

17.Related Party Transactions

The following summarizes the balances and transactions between the Company and Armand Products Company (“Armand”) and The ArmaKleen Company (“ArmaKleen”), in each of which the Company holds a 50% ownership interest:

	Armand				ArmaKleen
	Nine Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Purchases by Company	$	9.8	$	10.7	$	0.0	$	0.0
Sales by Company	$	0.0	$	0.0	$	0.8	$	0.7
Outstanding Accounts Receivable	$	0.4	$	0.3	$	0.5	$	0.7
Outstanding Accounts Payable	$	1.4	$	1.4	$	0.0	$	0.0
Administration & Management Oversight Services ⁽¹⁾	$	1.6	$	1.6	$	1.5	$	1.6

⁽¹⁾	Billed by the Company and recorded as a reduction of SG&A expenses.

18.

Segments

Segment Information

The Company operates three reportable segments: Consumer Domestic, Consumer International and Specialty Products Division. These segments are determined based on differences in the nature of products and organizational and ownership structures. The Company also has a Corporate segment.

Segment revenues are derived from the sale of the following products:

Segment			Products
Consumer Domestic			Household and personal care products
Consumer International			Primarily personal care products
SPD			Specialty chemical products

The Corporate segment income consists of equity in earnings of affiliates. As of September 30, 2021, the Company held 50% ownership interests in each of Armand and ArmaKleen, respectively. The Company’s equity in earnings of Armand and ArmaKleen, totaling $2.0 and $1.9 for the three months ended September 30, 2021 and 2020, respectively, and $7.4 and $5.5 for the nine months ended September 30, 2021 and 2020, respectively, are included in the Corporate segment.

Certain subsidiaries that are included in the Consumer International segment manufacture and sell personal care products to the Consumer Domestic segment. These sales are eliminated from the Consumer International segment results set forth in the table below.

Segment net sales and income before income taxes are as follows:

	Consumer		Consumer
	Domestic		International		SPD		Corporate⁽³⁾		Total
Net Sales⁽¹⁾
Third Quarter 2021	$	998.1	$	227.0	$	86.3	$	0.0	$	1,311.4
Third Quarter 2020		954.6		213.6		72.8		0.0		1,241.0
First Nine Months of 2021	$	2,900.2	$	670.2	$	251.0	$	0.0	$	3,821.4
First Nine Months of 2020		2,776.7		599.7		224.1		0.0		3,600.5

Income before Income Taxes⁽²⁾
Third Quarter 2021⁽⁴⁾	$	238.6	$	34.5	$	14.2	$	2.0	$	289.3
Third Quarter 2020⁽⁵⁾		220.6		32.4		6.6		1.9		261.5
First Nine Months of 2021⁽⁴⁾	$	713.7	$	110.9	$	35.6	$	7.4	$	867.6
First Nine Months of 2020⁽⁵⁾		671.8		94.0		25.6		5.5		796.9

⁽¹⁾

Intersegment sales from Consumer International to Consumer Domestic, which are not reflected in the table, were $2.6 and $3.3 for the three months ended September 30, 2021 and September 30, 2020, respectively, and were $7.8 and $9.1 for the nine months ended September 30, 2021 and September 30, 2020, respectively.

⁽²⁾	In determining income before income taxes, interest expense, investment earnings and certain aspects of other income and expense were allocated among segments based upon each segment’s relative income from operations.

⁽³⁾	Corporate segment consists of equity in earnings of affiliates from Armand and ArmaKleen for the three and nine months ended September 30, 2021 and September 30, 2020.

⁽⁴⁾

Results for the three months ended September 30, 2021 include a $41.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $34.8 was recorded to Consumer Domestic and $6.2 was recorded to Consumer International. Results for the nine months ended September 30, 2021 include a $98.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $83.2 was recorded to Consumer Domestic and $14.8 was recorded to Consumer International.

⁽⁵⁾

Results for the three months ended September 30, 2020 include a $51.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $43.3 was recorded to Consumer Domestic and $7.7 was recorded to Consumer International. Results for the nine months ended September 30, 2020 include a $72.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $61.2 was recorded to Consumer Domestic and $10.8 was recorded to Consumer International. In the first quarter of 2020, the Company sold its PERL WEISS® toothpaste brand in Germany resulting in a reduction in SG&A expenses of $3.0 recorded in Consumer International.

Product line revenues from external customers are as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Household Products	$	535.5	$	501.4	$	1,553.7	$	1,540.4
Personal Care Products		462.6		453.2		1,346.5		1,236.3
Total Consumer Domestic		998.1		954.6		2,900.2		2,776.7
Total Consumer International		227.0		213.6		670.2		599.7
Total SPD		86.3		72.8		251.0		224.1
Total Consolidated Net Sales	$	1,311.4	$	1,241.0	$	3,821.4	$	3,600.5

Household Products include laundry, deodorizing and cleaning products. Personal Care Products include condoms, pregnancy kits, oral care products, skin care and hair care products and gummy dietary supplements.

19.	Subsequent Event

Share Repurchase

On October 28, 2021, the Board authorized a new share repurchase program, under which the Company may repurchase up to $1,000.0 in shares of Common Stock (the “2021 Share Repurchase Program”). The 2021 Share Repurchase Program does not have an expiration and replaces the 2017 Share Repurchase Program. All remaining dollars authorized for repurchase under the 2017 Share Repurchase Plan have been cancelled. The 2021 Share Repurchase Program does not modify the Company’s evergreen share repurchase program, authorized by the Board on January 29, 2014, under which the Company may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under its incentive plans.

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

(In millions, except per share data)

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

COVID-19 and Other Recent Developments

The COVID-19 pandemic continues to impact certain of our businesses. Since the second quarter ended June 30, 2021, when certain government restrictions were reduced or removed, we have experienced increased demand for certain product categories, mainly in the United States, including ARM & HAMMER® cat litter, VITAFUSION® and L’IL CRITTERS® gummy vitamins, and Batiste® dry shampoo, in particular, that had been negatively impacted by the temporary and permanent closures of certain retailers, reduced consumer foot traffic at retailers, and COVID-19 related precautionary measures. Overall, we have continued to experience increased online sales.

We continue to experience challenges to meet customer demand and significant inflation of manufacturing and distribution costs (including fuel) due to shortages in supplier labor and many key raw and packaging materials as well as transportation challenges experienced by our suppliers and third-party manufacturers due primarily to the pandemic and exacerbated by the impact of Hurricane Ida. We expect this input cost inflation to continue for the remainder of 2021 and into 2022. To attempt to offset some of these cost pressures, we have recently enacted and continue to evaluate price increases. In addition, to address challenges meeting customer demand, we have taken steps to increase short-term manufacturing capacity for many of our products (including laundry detergent, baking soda, cleaners and vitamins), and continue to work closely with our suppliers, contract manufacturers and retail partners to ensure sustained supply to keep pace with increased demand. We have also made investments in the expansion of long-term, in-house and third-party manufacturing capacity and are working to enlist additional suppliers that meet our quality specifications. In addition, due to challenges meeting customer demand we have reduced marketing and promotional spending. While we expect supply availability issues to start improving in the first half of 2022 for most of our brands, there is no assurance that these challenges will abate in the near future or that our customers will accept all or a portion of these price increases or that the other measures we have or may implement will mitigate the impact of supply disruptions or rising costs.

The extent of COVID-19’s and other recent developments’ effect on our operational and financial performance in the future will depend on future developments, including the duration, spread and intensity of the pandemic, the spread and severity of new variants, the impact of vaccines, and our continued ability to manufacture and distribute our products, as well as any future government actions affecting employers, consumers and the economy generally, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Our priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees; maximizing the availability of products that help consumers with their health, hygiene and cleaning needs; and using our employees’ talents and our resources to help society meet and overcome the current challenges.

For additional information on the impacts and our response to the COVID-19 pandemic and other recent developments and the risks that could impact our results, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Results of Operations

Consolidated results

	Three Months Ended			Change vs.	Three Months Ended
	September 30, 2021			Prior Year	September 30, 2020
Net Sales	$	1,311.4		5.7%	$	1,241.0
Gross Profit	$	579.2		2.5%	$	565.2
Gross Margin		44.2	%	-130 basis points		45.5	%
Marketing Expenses	$	160.9		-5.9%	$	170.9
Percent of Net Sales		12.3	%	-150 basis points		13.8	%
Selling, General & Administrative Expenses	$	116.9		-3.0%	$	120.5
Percent of Net Sales		8.9	%	-80 basis points		9.7	%
Income from Operations	$	301.4		10.1%	$	273.8
Operating Margin		23.0	%	+100 basis points		22.0	%
Net income per share - Diluted	$	0.92		8.2%	$	0.85

	Nine Months Ended			Change vs.	Nine Months Ended
	September 30, 2021			Prior Year	September 30, 2020
Net Sales	$	3,821.4		6.1%	$	3,600.5
Gross Profit	$	1,682.3		1.5%	$	1,656.8
Gross Margin		44.0	%	-200 basis points		46.0	%
Marketing Expenses	$	376.6		-3.3%	$	389.6
Percent of Net Sales		9.9	%	-90 basis points		10.8	%
Selling, General & Administrative Expenses	$	403.0		-5.9%	$	428.1
Percent of Net Sales		10.5	%	-140 basis points		11.9	%
Income from Operations	$	902.7		7.6%	$	839.1
Operating Margin		23.6	%	+30 basis points		23.3	%
Net income per share - Diluted	$	2.68		6.3%	$	2.52

Diluted Net Income per share was $0.92 in the third quarter of 2021 as compared to $0.85 in the third quarter of 2020. Diluted Net Income per share was $2.68 in the first nine months of 2021 as compared to $2.52 in the same period in 2020.

During the third quarter of 2021 we decreased the fair value of our business acquisition liability associated with the 2019 acquisition of the FLAWLESS® hair removal business (the “Flawless Acquisition”) by $41.0 ($30.8 after tax or $0.12 diluted per share), and a total reduction of $98.0 ($73.5 after tax or $0.29 diluted per share) for the nine months ended September 30, 2021, based on updated sales forecasts. After giving effect to the third quarter decrease, the value of the business acquisition liability has been reduced to $0.0. The business acquisition liability adjustments are recorded as a reduction in SG&A expense.

During the third quarter of 2020 we decreased the fair value of our contingent liability associated with the 2019 acquisition of the FLAWLESS hair removal business (the “Flawless Acquisition”) from Ideavillage Products Corporation by $51.0 ($38.2 after tax or $0.15 diluted per share), for a total net reduction of $72.0 ($54.0 after tax or $0.21 diluted per share) for the nine months ended September 30, 2020 based on updated sales forecasts and the passage of time. The business acquisition liability adjustments are recorded as a reduction in SG&A expense.

During the first quarter of 2020, we completed the sale of the PERL WEISS® toothpaste brand in Germany which resulted in a gain of $3.0 ($2.2 after tax or $0.01 diluted per share) recorded in SG&A expense.

Net Sales

Net sales for the quarter ended September 30, 2021 were $1,311.4, an increase of $70.4 or 5.7% as compared to the same period in 2020. Net sales for the nine months ended September 30, 2021 were $3,821.4, an increase of $220.9 or 6.1% over the comparable nine month period of 2020. The components of the net sales increase are as follows:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Net Sales - Consolidated	2021			2021
Product volumes sold		(1.5	)%		1.9	%
Pricing/Product mix		5.2	%		2.4	%
Foreign exchange rate fluctuations		0.7	%		1.1	%
Acquired product lines (net of divestiture) ⁽¹⁾		1.3	%		0.7	%
Net Sales increase		5.7	%		6.1	%

⁽¹⁾

On December 1, 2020, we acquired all of the outstanding equity of Consumer Health Holdco LLC, the owner of the ZICAM® brand and cold remedy products business (the “Zicam Acquisition”). The results of this acquisition are included in our results since the date of acquisition. During the first quarter of 2020 we completed the sale of the PERL WEISS brand.

For the three months ended September 30, 2021, the volume change reflects decreased product unit sales in the Consumer Domestic segment, partially offset by increased product unit sales in the Consumer International and Specialty Products (“SPD”) segments. For the nine months ended September 30, 2021, the volume change reflects increased product unit sales in all three segments. For the three months ended September 30, 2021, price/mix was favorable in all three segments. For the nine months ended September 30, 2021, price/mix was favorable in the Consumer Domestic and SPD segments, but was partially offset by unfavorable price/mix in the Consumer International segment.

Gross Profit / Gross Margin

Our gross profit was $579.2 for the three months ended September 30, 2021, a $14.0 increase as compared to the same period in 2020. Gross margin decreased 130 basis points (“bps”) in the third quarter of 2021 compared to the same period in 2020, due to the impact of higher manufacturing costs including commodities of 440 bps, higher transportation costs of 60 bps, and higher costs of 40 bps as a result of incremental tariffs, partially offset by favorable price/volume/mix of 250 bps, the impact of productivity programs of 120 bps, and business acquisition benefits of 40 bps. Gross profit was $1,682.3 for the nine months ended September 30, 2021, a $25.5 increase compared to the same period in 2020. Gross margin decreased 200 bps in the first nine months of 2021 compared to the same period in 2020, due to the impact of higher manufacturing costs including commodities of 410 bps, higher transportation costs of 70 bps, and higher costs of 40 bps as a result of incremental tariffs, partially offset by the impact of favorable price/volume/mix of 180 bps and productivity programs of 140 bps.

Operating Expenses

Marketing expenses for the three months ended September 30, 2021 were $160.9, a decrease of $10.0 or 5.9% as compared to the same period in 2020. Marketing expenses as a percentage of net sales in the third quarter of 2021 decreased by 150 bps to 12.3% as compared to 13.8% in the same period in 2020 due to 80 bps on lower expenses and 70 bps of leverage on higher net sales. We reduced marketing spending in the quarter, mainly in household products, as supply shortages impacted our ability to meet customer demand. Marketing expenses for the nine months ended September 30, 2021 were $376.6, a decrease of $13.0 or 3.3% as compared to the same period in 2020. Marketing expenses as a percentage of net sales for the first nine months of 2021 decreased by 90 bps to 9.9% as compared to 10.8% in the same period in 2020 due to 60 bps of leverage on higher net sales and 30 bps on lower expenses.

SG&A expenses were $116.9 in the third quarter of 2021, a decrease of $3.6 or 3.0% as compared to the same period in 2020. SG&A as a percentage of net sales decreased 80 bps to 8.9% in the third quarter of 2021 as compared to 9.7% in the same period in 2020. The decrease is due to 50 bps of leverage associated with higher sales and 30 bps on lower expenses. The lower expenses for the three-month period ended September 30, 2021 are primarily due to lower incentive compensation and litigation costs, partially offset by higher expense related to the Zicam Acquisition (including amortization) and a lower year-over-year favorable adjustment to the fair value of the Flawless business acquisition liability of $10.0. SG&A expenses for the first nine months of 2021 were $403.0, a decrease of $25.1 or 5.9% as compared to the same period in 2020. SG&A as a percentage of net sales decreased 140 bps to 10.5% in the first nine months of 2021 compared to 11.9% in 2020 due to 70 bps on lower expenses and 70 bps of leverage associated with higher sales. The lower expenses for the nine-month period ended September 30, 2021 included a higher year-over-year favorable adjustment to the fair value of the Flawless business acquisition liability of $26.0 and lower incentive compensation and litigation costs, partially offset by higher expense related to the Zicam Acquisition (including amortization) and the prior year gain on the sale of PERL WEISS.

Other (income) expense, net was nominal for the three and nine months ended September 30, 2021 and 2020.

Interest expense for the three and nine months ended September 30, 2021 decreased $0.5 and $5.5 to $13.4 and $41.5 respectively, as compared to the same period in 2020, primarily due to lower interest rates.

Income Taxes

The effective tax rate for the three and nine months ended September 30, 2021 was 20.4% and 22.8% respectively, compared to 17.3% and 20.2% in the same periods in 2020. The increase in the tax rate for both periods is primarily due to lower stock option exercises, offset by the partial reduction of a valuation allowance related to foreign tax credits.

Segment results

We operate three reportable segments: Consumer Domestic, Consumer International and SPD. These segments are determined based on differences in the nature of products and organizational and ownership structures. We also have a Corporate segment.

Segment			Products
Consumer Domestic			Household and personal care products
Consumer International			Primarily personal care products
SPD			Specialty chemical products

The Corporate segment income consists of equity in earnings of affiliates. As of September 30, 2021, we held 50% ownership interests in each of Armand Products Company (“Armand”) and The ArmaKleen Company (“ArmaKleen”), respectively. Our equity in earnings of Armand and ArmaKleen, totaling $2.0 and $1.9 for the three months ended September 30, 2021 and 2020, respectively, and $7.4 and $5.5 for the nine months ended September 30, 2021 and 2020, respectively are included in the Corporate segment. Certain subsidiaries that are included in the Consumer International segment manufacture and sell personal care products to the Consumer Domestic segment. These sales are eliminated from the Consumer International segment results set forth below.

Segment net sales and income before income taxes for the three and nine months ended September 30, 2021 and September 30, 2020 are as follows:

	Consumer		Consumer
	Domestic		International		SPD		Corporate⁽³⁾		Total
Net Sales⁽¹⁾
Third Quarter 2021	$	998.1	$	227.0	$	86.3	$	0.0	$	1,311.4
Third Quarter 2020		954.6		213.6		72.8		0.0		1,241.0
First Nine Months of 2021	$	2,900.2	$	670.2	$	251.0	$	0.0	$	3,821.4
First Nine Months of 2020		2,776.7		599.7		224.1		0.0		3,600.5

Income before Income Taxes⁽²⁾
Third Quarter 2021⁽⁴⁾	$	238.6	$	34.5	$	14.2	$	2.0	$	289.3
Third Quarter 2020⁽⁵⁾		220.6		32.4		6.6		1.9		261.5
First Nine Months of 2021⁽⁴⁾	$	713.7	$	110.9	$	35.6	$	7.4	$	867.6
First Nine Months of 2020⁽⁵⁾		671.8		94.0		25.6		5.5		796.9

⁽¹⁾

⁽²⁾	In determining income before income taxes, interest expense, investment earnings and certain aspects of other income and expense were allocated among the segments based upon each segment’s relative income from operations.

⁽³⁾	Corporate segment consists of equity in earnings of affiliates from Armand and ArmaKleen for the three and nine months ended September 30, 2021 and September 30, 2020.

⁽⁴⁾

⁽⁵⁾

Results for the three months ended September 30, 2020 include a $51.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $43.3 was recorded to Consumer Domestic and $7.7 was recorded to Consumer International. Results for the nine months ended September 30, 2020 include a $72.0 reduction in SG&A expenses to adjust the Flawless business acquisition liability, of which $61.2 was recorded to Consumer Domestic and $10.8 was recorded to Consumer International. In the first quarter of 2020, we sold our PERL WEISS toothpaste brand in Germany resulting in a reduction in SG&A expenses of $3.0 recorded in Consumer International.

Product line revenues from external customers are as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Household Products	$	535.5	$	501.4	$	1,553.7	$	1,540.4
Personal Care Products		462.6		453.2		1,346.5		1,236.3
Total Consumer Domestic		998.1		954.6		2,900.2		2,776.7
Total Consumer International		227.0		213.6		670.2		599.7
Total SPD		86.3		72.8		251.0		224.1
Total Consolidated Net Sales	$	1,311.4	$	1,241.0	$	3,821.4	$	3,600.5

Household Products include laundry, deodorizing, and cleaning products. Personal Care Products include condoms, pregnancy kits, oral care products, skin care and hair care products and gummy dietary supplements.

Consumer Domestic

Consumer Domestic net sales in the third quarter of 2021 were $998.1, an increase of $43.5 or 4.6% as compared to the same period in 2020. Consumer Domestic net sales for the nine months ended September 30, 2021 were $2,900.2, an increase of $123.5 or 4.4% as compared to the same period in 2020. The components of the net sales change are the following:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Net Sales - Consumer Domestic	2021			2021
Product volumes sold		(3.2	)%		0.8	%
Pricing/Product mix		6.0	%		2.7	%
Acquired product lines ⁽¹⁾		1.8	%		0.9	%
Net Sales increase		4.6	%		4.4	%

⁽¹⁾	Includes the Zicam Acquisition since the date of acquisition.

The increase in net sales for the three months ended September 30, 2021, reflects the impact of the Zicam Acquisition, higher net sales in ARM & HAMMER clumping cat litter, ARM & HAMMER liquid detergent, VITAFUSION gummy vitamins, BATISTE dry shampoo and OXICLEAN® powder. The increase in net sales for the nine-month period ending September 30, 2021, reflects the impact of the Zicam Acquisition, higher net sales in ARM & HAMMER clumping cat litter, WATERPIK® oral care products, VITAFUSION and L’IL CRITTERS gummy vitamins, BATISTE dry shampoo, ARM & HAMMER scent booster, and OXICLEAN® powder.

In recent years our TROJAN® business, specifically the condom category, has not grown and competition has increased. Social distancing requirements due to the COVID-19 pandemic have further negatively impacted the business. As a result, the TROJAN business has experienced stagnant sales and profits resulting in a reduction in expected future cash flows which has eroded a portion of the excess between the fair and carrying value of the tradename. This indefinite-lived intangible asset is susceptible to impairment risk and a continued decline in fair value could trigger a future impairment charge of the TROJAN tradename. While management can and has implemented strategies to address the risk, including lowering our production costs, investing in new product ideas, and developing new creative advertising, significant changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair value. More recently, the category is experiencing a recovery as it is benefiting from an easing of COVID-19 social restrictions leading to an increase in sexual activity. We expect this trend will continue into next year with the continued adoption of vaccines and reduction of social distancing restrictions.

The carrying value of the TROJAN tradename is $176.4 and fair value exceeded carrying value by 53% as of December 31, 2020.

Consumer Domestic income before income taxes for the third quarter of 2021 was $238.6, an $18.0 increase as compared to the third quarter of 2020. The increase is due primarily to favorable price/mix of $52.0, lower marketing expenses of $11.7, and lower SG&A expenses of $7.1 (which was impacted by a lower year-over-year favorable adjustment to the fair value of the Flawless business acquisition liability of $8.5), partially offset by unfavorable manufacturing and distribution expenses of $48.8 and $4.0 impact from lower volumes. For the nine-month period ended September 30, 2021, income before income taxes was $713.7, a $41.9 increase as compared to the first nine months of 2020. The increase is due primarily to favorable price/mix of $65.7, a $38.6 benefit from higher volumes, lower SG&A expenses of $29.8 (including a $22.0 favorable year-over-year fair value adjustment to the Flawless business acquisition liability), lower marketing expenses of $24.8, and lower other expenses of $5.1, partially offset by unfavorable manufacturing and distribution expenses of $121.9.

Consumer International

Consumer International net sales were $227.0 in the third quarter of 2021, an increase of $13.4 or 6.3% as compared to the same period in 2020. Consumer International net sales in the first nine months of 2021 were $670.2, an increase of $70.5 or 11.8% as compared to the same period in 2020. The components of the net sales change are the following:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Net Sales - Consumer International	2021			2021
Product volumes sold		1.7	%		5.7	%
Pricing/Product mix		0.6	%		(0.6	%)
Foreign exchange rate fluctuations		4.0	%		6.7	%
Net Sales increase		6.3	%		11.8	%

Excluding the impact of foreign exchange rates, higher sales in the third quarter ended September 30, 2021 were driven primarily by WATERPIK, STERIMAR®, ANUSOL, and BATISTE in Europe, STERIMAR, FEMFRESH®, VITAFUSION and L’IL CRITTERS gummy vitamins, ARM & HAMMER Dental Care, BATISTE, and ANUSOL in the Global Markets Group (“GMG”) business. For the nine months ended September 30, 2021 higher sales were driven primarily by WATERPIK, ARM & HAMMER liquid laundry detergent, and ARM & HAMMER Dental Care in GMG, WATERPIK and ANUSOL in Europe, FIRST RESPONSE® pregnancy kits in Australia, and TROJAN in Mexico.

Consumer International income before income taxes was $34.5 in the third quarter of 2021, a $2.1 increase as compared to the third quarter of 2020. Favorable price mix of $3.2, a $2.6 benefit from higher sales volumes, and favorable foreign exchange rates of $1.3, were partially offset by unfavorable manufacturing and commodity costs of $5.2. For the first nine months of 2021, income before income taxes was $110.9, a $16.9 increase as compared to the same period in 2020, due to a $20.6 benefit from higher sales volumes, favorable foreign exchange rates of $9.0, and lower SG&A costs of $1.2 (including a $4.0 favorable year-over-year fair value adjustment to the Flawless business acquisition liability), favorable price mix of $0.9, and lower other expenses of $0.7 offset by higher marketing expenses of $5.8, and unfavorable manufacturing and commodity costs of $9.6.

Specialty Products (“SPD”)

SPD net sales were $86.3 in the third quarter of 2021, an increase of $13.5 or 18.5% as compared to the same period in 2020. SPD net sales were $251.0 for the first nine months of 2021, an increase of $26.9, or 12.0% as compared to the same period in 2020. The components of the net sales change are the following:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Net Sales - SPD	2021			2021
Product volumes sold		10.8	%		5.1	%
Pricing/Product mix		7.7	%		6.9	%
Net Sales increase		18.5	%		12.0	%

Net sales increased in the third quarter and the nine months of 2021 due to higher volumes across all categories, higher pricing for our dairy segment products and reduced competitive imports due to a constrained transportation market.

SPD income before income taxes was $14.2 in the third quarter of 2021, an increase of $7.6 as compared to the same period in 2020, due to favorable price/product mix of $5.6, a $3.6 benefit from higher volumes, and lower SG&A costs of $3.5, offset by unfavorable manufacturing costs of $4.7, higher other expenses of $0.3 and higher marketing expenses of $0.1. SPD income before income taxes was $35.6 in the first nine months of 2021, an increase of $10.0 as compared to the same period in 2020 due primarily to favorable price/product mix of $15.5, lower SG&A costs of $5.7, and a $3.4 benefit from higher sales volumes, partially offset by unfavorable manufacturing costs of $13.9, higher marketing expenses of $0.4 and higher other expenses of $0.2.

Corporate

The Corporate segment includes equity in earnings of affiliates from Armand and ArmaKleen in the three and nine months of 2021 and 2020. The Corporate segment income before income taxes was $2.0 in the third quarter of 2021, as compared to $1.9 in the same period in 2020. The Corporate segment income before income taxes was $7.4 for the first nine months of 2021, as compared to $5.5 in the same period in 2020.

Liquidity and Capital Resources

On May 1, 2019, we amended the credit agreement (the “Credit Agreement”) that provides for our $1,000.0 unsecured revolving credit facility (the “Revolving Credit Facility”) to extend the term of the Revolving Credit Facility from March 29, 2023 to March 29, 2024. We continue to have the ability to increase our borrowing up to an additional $600.0, subject to lender commitments and certain conditions as described in the Credit Agreement. Borrowings under the Credit Agreement are available for general corporate purposes.

As of September 30, 2021, we had $180.0 in cash and cash equivalents, and approximately $716.0 available through the Revolving Credit Facility and our commercial paper program. To preserve our liquidity, we invest cash primarily in government money market funds, prime money market funds, short-term commercial paper and short-term bank deposits.

The current economic environment presents risks that could have adverse consequences for our liquidity. See “Unfavorable economic conditions could adversely affect demand for our products” under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Form 10-K”). Although there is uncertainty related to the impact of the COVID-19 pandemic and other recent developments on our future results, we believe our efficient business model and strong balance sheet position us to manage our business through this crisis. We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth. We do not anticipate that current economic conditions will adversely affect our ability to comply with the financial covenant in the Credit Agreement because we currently are, and anticipate that we will continue to be, in compliance with the maximum leverage ratio requirement under the Credit Agreement.

In June 2021, we repaid $100.0 principal of the $300.0 term loan due May 1, 2022, with the remaining $200.0 principal repaid in early July 2021. The term loan was repaid with proceeds from commercial paper borrowings and cash on hand.

On January 29, 2021, the Board declared a 5.2% increase in the regular quarterly dividend from $0.24 to $0.2525 per share, equivalent to an annual dividend of $1.01 per share payable to stockholders of record as of February 16, 2021. The increase raises the annual dividend payout from $237.0 to approximately $250.0.

In December 2020, we entered into an accelerated share repurchase (“ASR”) contract with a commercial bank to purchase Common Stock. We paid $300.0 to the bank, inclusive of fees, and received an initial delivery of shares equal to $270.0, or 3.1 million shares. We used cash on hand and short-term borrowings to fund the initial purchase price. Upon the completion of the ASR, which ended in February 2021, the bank delivered to us an additional 0.4 million shares. The final shares delivered to us were determined by the average price per share paid by the bank during the purchase period. All 3.5 million shares were purchased under our evergreen stock repurchase program.

In August 2021, we executed an agreement to purchase up to $200.0 of our Common Stock through October 31, 2021. During the quarter we purchased 0.7 million shares for approximately $55.0, inclusive of fees, all of which was purchased under the 2017 Share Repurchase Program. In October 2021, as of the filing date of this Quarterly Report on Form 10-Q, we purchased an additional 0.9 million shares for approximately $75.0.

On October 28, 2021, the Board authorized a new share repurchase program under which we may purchase up to $1,000.0 in shares of Common Stock (the “2021 Share Repurchase Program”). The 2021 Share Repurchase Program does not have an expiration and replaces the Company’s 2017 Share Repurchase Program. All remaining dollars authorized for repurchase under the 2017 Share Repurchase Plan have been cancelled. The 2021 Share Repurchase Program does not modify our evergreen share repurchase program, authorized by the Board on January 29, 2014, under which we may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under our incentive plans.

We anticipate that our cash from operations, together with our current borrowing capacity, will be sufficient to fund our share repurchase programs to the extent implemented by management, pay debt and interest as it comes due and pay dividends at the latest approved rate, and meet our capital expenditure program costs, which are expected to be approximately $120.0 in 2021 primarily for manufacturing capacity investments in laundry, litter and vitamins to support expected future sales growth. We do not have any mandatory fixed rate debt principal payments due in 2021. Cash, together with our current borrowing capacity, may be used for acquisitions that would complement our existing product lines or geographic markets.

Cash Flow Analysis

	Nine Months Ended
	September 30,			September 30,
	2021			2020
Net cash provided by operating activities	$	653.6		$	798.2
Net cash used in investing activities	$	(69.7	)	$	(51.2	)
Net cash used in financing activities	$	(585.4	)	$	(353.7	)

Net Cash Provided by Operating Activities – Our primary source of liquidity is the cash flow provided by operating activities, which is dependent on net income and changes in working capital. Our net cash provided by operating activities in the nine months ended September 30, 2021 decreased by $144.6 to $653.6 as compared to $798.2 in the same period in 2020 due to an increase in working capital partially offset by higher cash earnings (net income adjusted for non-cash items such as depreciation, amortization, non-cash compensation and changes in business acquisition liabilities and deferred taxes). The increase in working capital is primarily related to lower obligations for incentive compensation and marketing as well as higher inventory levels. We measure working capital effectiveness based on our cash conversion cycle. The following table presents our cash conversion cycle information for the quarters ended September 30, 2021 and 2020:

	As of
	September 30, 2021		September 30, 2020		Change
Days of sales outstanding in accounts receivable ("DSO")		28		26		2
Days of inventory outstanding ("DIO")		68		64		4
Days of accounts payable outstanding ("DPO")		73		74		1
Cash conversion cycle		23		16		7

Our cash conversion cycle (defined as the sum of DSO and DIO less DPO) which is calculated using a two-period average method, increased 7 days from the prior year due to higher inventory to support expected sales growth and improvement in service levels, as well as higher accounts receivable primarily related to the timing of sales. We continue to focus on reducing our working capital requirements.

Net Cash Used in Investing Activities – Net cash used in investing activities during the first nine months of 2021 was $69.7, primarily reflecting $64.1 for property, plant and equipment additions. Net cash used in investing activities during the first nine months of 2020 was $51.2, primarily reflecting $54.6 for property, plant and equipment additions, partially offset by cash proceeds of $7.0 from the sale of the PERL WEISS toothpaste brand in Germany.

Net Cash Used in Financing Activities – Net cash used in financing activities during the first nine months of 2021 was $585.4, reflecting $371.6 of net debt payments, $185.8 of cash dividend payments, and $54.9 of treasury stock purchases, partially offset by $26.9 of proceeds from stock option exercises. Net cash used in financing activities during the first nine months of 2020 was $353.7, reflecting $250.4 of net debt payments, $177.7 of cash dividend payments, and $14.5 for the Agro business acquisition liability settlement, partially offset by $89.1 of proceeds from stock option exercises.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk

For quantitative and qualitative disclosures about market risk affecting the Company, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II in the Form 10-K.

ITEM 4.

CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission (the “Commission”), and

(ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the disclosure.

b) Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurring during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This report contains forward-looking statements, including, among others, statements relating to net sales and earnings growth; the impact of the COVID-19 pandemic and the Company’s response; gross margin changes; trade and marketing spending; marketing expense as a percentage of net sales; sufficiency of cash flows from operations; earnings per share; the impact of new accounting pronouncements; cost savings programs; consumer demand and spending; the effects of competition; the effect of product mix; volume growth, including the effects of new product launches into new and existing categories; the decline of condom usage; the Company’s hedge programs; the impact of foreign exchange, tariffs, and commodity price fluctuations; impairments and other charges; the Company’s investments in joint ventures; the impact of acquisitions and divestitures; capital expenditures; the Company’s effective tax rate; the impact of tax audits; tax changes and the lapse of applicable statutes of limitations; the effect of the credit environment on the Company’s liquidity and capital resources; the Company’s fixed rate debt; compliance with covenants under the Company’s debt instruments; the Company’s commercial paper program; the Company’s current and anticipated future borrowing capacity to meet capital expenditure program costs; and the Company’s share repurchase programs; payment of dividends; environmental and regulatory matters; the availability and adequacy of raw materials, including trona reserves and the conversion of such reserves; and the customers and consumer acceptance of certain ingredients in our products. Other forward-looking statements in this report are generally identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to make” or other comparable terms. These statements represent the intentions, plans, expectations and beliefs of the Company, and are based on assumptions that the Company believes are reasonable but may prove to be incorrect. In addition, these statements are subject to risks, uncertainties and other factors, many of which are outside the Company’s control and could cause actual results to differ materially from such forward-looking statements. Factors that could cause such differences include a decline in market growth, retailer distribution and consumer demand (as a result of, among other things, political, economic and marketplace conditions and events), including those relating to the outbreak of contagious diseases; other impacts of the COVID-19 pandemic and its impact on the Company’s operations, customers, suppliers, employees, and other constituents, and market volatility and impact on the economy (including causing recessionary conditions), resulting from global, nationwide or local or regional outbreaks or increases in infections, new variants, and the risk that the Company will not be able to successfully execute its response plans with respect to the pandemic or localized outbreaks and the corresponding uncertainty; the impact of regulatory changes or policies associated with the COVID-19 pandemic, including continuing or renewed shutdowns of retail and other businesses in various jurisdictions; the impact of the CARES Act and other governmental actions; the impact of continued shifts in consumer behavior, including accelerating shifts to on-line shopping; unanticipated increases in raw material and energy prices; delays and increased costs in manufacturing and distribution; increases in transportation costs; labor shortages; the impact of price increases for our products; the impact of supply chain disruptions; the impact of inclement weather on raw material and transportation costs; adverse developments affecting the financial condition of major customers and suppliers; competition; changes in marketing and promotional spending; growth or declines in various product categories and the impact of customer actions in response to changes in consumer demand and the economy, including increasing shelf space or on-line share of private label and retailer-branded products or other changes in the retail environment; consumer and competitor reaction to, and customer acceptance of, new product introductions and features; the Company’s ability to maintain product quality and characteristics at a level acceptable to our customers and consumers; disruptions in the banking system and financial markets; foreign currency exchange rate fluctuations; implications of the United Kingdom’s withdrawal from the European Union; transition to, and shifting economic policies in the United States; potential changes in export/import and trade laws, regulations and policies of the United States and other countries, including any increased trade restrictions or tariffs, including the actual and potential effect of tariffs on Chinese goods imposed by the United States; increased or changing regulation regarding the Company’s products in the United States and other countries where it or its suppliers operate; market volatility; issues relating to the Company’s information technology and controls; the impact of natural disasters, including those related to climate change, on the Company and its customers and suppliers, including third party information technology service providers; integrations of acquisitions or divestiture of assets; the outcome of contingencies, including litigation, pending regulatory proceedings and environmental matters; and changes in the regulatory environment.

The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the United States federal securities laws. You are advised, however, to consult any further disclosures the Company makes on related subjects in its filings with the United States Securities and Exchange Commission (the “Commission”).

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

General

The Company, in the ordinary course of its business, is subject of, or party to, various pending or threatened legal actions, government investigations and proceedings from time to time, including, without limitation, those relating to commercial transactions, product liability, purported consumer class actions, employment matters, antitrust, environmental, health, safety and other compliance related matters. Such proceedings are subject to many uncertainties and the outcome of certain pending or threatened legal actions may not be reasonably predictable and any related damages may not be estimable. Certain legal actions could result in an adverse outcome for us, and any such adverse outcome could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Form 10-K, which could materially affect the Company’s business, financial condition or future results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company repurchases shares of its Common Stock from time to time pursuant to its publicly announced share repurchase programs.

On October 28, 2021, the Board authorized a new share repurchase program under which the Company may purchase up to $1,000.0 in shares of Common Stock (the “2021 Share Repurchase Program”). The 2021 Share Repurchase Program does not have an expiration and replaces the Company’s 2017 Share Repurchase Program. All remaining dollars authorized for repurchase under the 2017 Share Repurchase Plan have been cancelled. The 2021 Share Repurchase Program does not modify the Company’s evergreen share repurchase program, authorized by the Board on January 29, 2014, under which the Company may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under its incentive plans.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under All Programs
7/1/2021 to 7/31/2021		-	$	-		-	$	210,000,000
8/1/2021 to 8/31/2021		170,499		82.63		170,499	$	195,911,271
9/1/2021 to 9/30/2021		492,772		82.85		492,772	$	155,086,041
Total		663,271	$	82.79		663,271

ITEM 6.

EXHIBITS

Exhibit Index


	(3.1)		Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s quarterly report on Form 10-Q filed on June 30, 2020.

	(3.2)		Amendment to the Company’s Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on April 30, 2021.

	(3.3)		By-laws of the Company, amended and restated as of May 1, 2020, incorporated by reference to Exhibit 3.2 to the Company’s current report on Form 8-K filed on May 1, 2020.

•	(31.1)		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act.

•	(31.2)		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act.

•	(32.1)		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.

•	(32.2)		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.

	(101.INS)		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

		(101.SCH)	Inline XBRL Taxonomy Extension Schema Document.
		(101.CAL)	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

		(101.DEF)	Inline XBRL Taxonomy Extension Definition Linkbase Document.
		(101.LAB)	Inline XBRL Taxonomy Extension Label Linkbase Document.

		(101.PRE)	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

		(104)	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

•	Indicates documents filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CHURCH & DWIGHT CO., INC.
		(REGISTRANT)

DATE:	October 29, 2021	/s/ Richard A. Dierker
		RICHARD A. DIERKER
		Executive Vice President
		and Chief Financial Officer
		(Principal Financial Officer)

DATE:	October 29, 2021	/s/ Joseph J. Longo
		JOSEPH J. LONGO
		VICE PRESIDENT AND
		CONTROLLER
		(PRINCIPAL ACCOUNTING OFFICER)