# Church & Dwight Co Inc: Form 10-Q for the period ended Mar 31, 2022

- Company: [Church & Dwight Co Inc](/companies/chd.md) (CIK 313927)
- Form: 10-Q
- Filed: 2022-04-28
- Accepted by EDGAR: Apr 28, 2022, 16:49 ET
- Period: 2022-03-31
- Accession: 0000950170-22-006478
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/313927/000095017022006478/chd-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/313927/000095017022006478/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $1.30bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $744.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-01-01 to 2022-03-31 | $552.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-01-01 to 2022-03-31 | $24.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2022-01-01 to 2022-03-31 | $169.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $280.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $16.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $61.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $204.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.83 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.84 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 246,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $152.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $15.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $63.7m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2022-03-31 | $174.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $1.22bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $7.94bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $1.87bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $4.54bn | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $1.61bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $699.7m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2022-03-31 | $103.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-03-31 | $3.40bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,817 characters.

#### Recent Developments

#### COVID-19 and Other Related Recent Developments

The COVID-19 pandemic continues to impact our business. During the onset of the pandemic, demand for many of our brands was impacted by "stay at home" orders and the temporary and permanent closure of certain retailers. As government restrictions were reduced or removed and stimulus actions, primarily in the US, benefitted consumers, we started to experience an increase in demand for many of our brands. More recently, the impacts to our business have been primarily supply chain related, including labor shortages and challenges with distribution and transportation, resulting in difficulty meeting customer demand and significant broad-based cost inflation. In addition, recent government restrictions in China have further exacerbated global supply chain challenges and may also have a negative impact on demand for certain of our products in China, because many Chinese consumers are restricted to their homes, thereby reducing consumer in-store foot traffic and delivery services. While it is difficult to predict with certainty when these challenges might subside, we expect shortages to continue at least through the first half of 2022 and input cost inflation to continue at least throughout 2022.

To attempt to offset some of the cost pressures we are experiencing, we have recently enacted and continue to evaluate price increases. In addition, to address challenges meeting customer demand, we have taken steps to increase our short-term manufacturing capacity for many of our products (including laundry detergent, baking soda, cleaners and vitamins) as well as our raw material and packaging capacity, and continue to work closely with our suppliers, contract manufacturers and retail partners to increase capacity and 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. While we expect supply availability issues to start improving in the second half of 2022 for most of our brands, there is no assurance that these challenges will abate in the foreseeable future or that our customers will accept all or a portion of any price increases, or that the other measures we have or may implement will mitigate the impact of supply disruptions or rising costs.

Looking forward, the extent that COVID-19 and other recent developments’ have on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, the spread and severity of new variants, the long-term impact of vaccines, and our continued ability to obtain an adequate supply of materials and recruit and retain a workforce and engage third-parties to manufacture and distribute our products, as well as any future government actions affecting employers and employees, 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.

We are monitoring the impact of both inflation and the COVID-19 pandemic, including the effect of corresponding government actions, such as raising interest rates to counteract inflation, that may negatively impact consumer spending, and how these factors will potentially influence future cash flows for the short and long term. While we expect that many of these effects will be transitory and that our value focused portfolio positions us well in an inflationary and slowing economic environments, it is impossible to predict their impact.

#### Russia - Ukraine War

The global economy has been negatively impacted by the military conflict between Russia and Ukraine. Furthermore, governments in the U.S., United Kingdom, and European Union have each imposed export controls on certain products as well as financial and economic sanctions on certain industry sectors and parties in Russia and Belarus. We have experienced shortages in materials and increased costs for transportation, energy, and raw material due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. Further escalation of geopolitical tensions related to the conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyber attacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.

We have no operations in Russia or Ukraine. Sales into Russia and Belarus, which have been suspended indefinitely, are not material to the Company’s consolidated net sales and earnings.

### Results of Operations

### Consolidated results

|  | Three Months Ended March 31, 2022 | Change vs. Prior Year | Three Months Ended March 31, 2021 |
| --- | ---: | ---: | ---: |
| **Net Sales** | **$1,297.2** | 4.7% | $1,238.9 |
| **Gross Profit** | **$552.5** | 0.3% | $550.9 |
| Gross Margin | **42.6%** | -190 basis points | 44.5% |
| **Marketing Expenses** | **$101.9** | 3.2% | $98.7 |
| Percent of Net Sales | **7.9%** | -10 basis points | 8.0% |
| **Selling, General & Administrative Expenses** | **$169.9** | 13.6% | $149.6 |
| Percent of Net Sales | **13.1%** | +100 basis points | 12.1% |
| **Income from Operations** | **$280.7** | -7.2% | $302.6 |
| Operating Margin | **21.6%** | -280 basis points | 24.4% |
| **Net income per share - Diluted** | **$0.83** | -5.7% | $0.88 |

Diluted Net Income per share was $0.83 in the first quarter of 2022 as compared to $0.88 in the first quarter of 2021.

During the first 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 $19.0 ($14.3 after tax or $0.05 per diluted share), based on updated sales forecasts. The business acquisition liability adjustment was recorded as a reduction in SG&A expense.

#### Net Sales

Net sales for the quarter ended March 31, 2022 were $1,297.2, an increase of $58.3 or 4.7% as compared to the same period in 2021. The components of the net sales increase are as follows:

| Net Sales - Consolidated | Three Months Ended March 31, 2022 |
| --- | ---: |
| Product volumes sold | (5.1%) |
| Pricing/Product mix | 7.8% |
| Foreign exchange rate fluctuations | (0.3%) |
| Acquired product lines (1) | 2.3% |
| **Net Sales increase** | **4.7%** |

(1) On December 24, 2021, we acquired all of the outstanding equity of Dr. Harold Katz, LLC and HK-IP International, Inc., the owners of the THERABREATH brand of oral care products (the “TheraBreath Acquisition”). The results of this acquisition are included in our results since the date of acquisition.

For the three months ended March 31, 2022, the volume change reflects decreased product unit sales in the Consumer Domestic and Consumer International segments, partially offset by increased product unit sales in the Specialty Products (“SPD”) segments. For the three months ended March 31, 2022, price/mix was favorable in all three segments.

#### Gross Profit / Gross Margin

Our gross profit was $552.5 for the three months ended March 31, 2022, a $1.6 increase as compared to the same period in 2021. Gross margin decreased 190 basis points (“bps”) in the first quarter of 2022 compared to the same period in 2021, due to the impact of higher manufacturing costs including labor and commodities of 450 bps, higher transportation costs of 100 bps, and unfavorable foreign exchange of 10 bps, offset by favorable price/volume/mix of 270 bps, the impact of productivity programs of 70 bps, and business acquisition benefits of 30 bps.

#### Operating Expenses

Marketing expenses for the three months ended March 31, 2022 were $101.9, an increase of $3.2 or 3.2% as compared to the same period in 2021. Marketing expenses as a percentage of net sales in the first quarter of 2022 decreased by 10 bps to 7.9% as compared to 8.0% in the same period in 2021 due to 40 bps of leverage on higher net sales, offset by 30 bps on higher expenses.

SG&A expenses were $169.9 in the first quarter of 2022, an increase of $20.3 or 13.6% as compared to the same period in 2021. SG&A as a percentage of net sales increased 100 bps to 13.1% in the first quarter of 2022 as compared to 12.1% in the same period in 2021. The increase is due to 160 bps on higher expenses, offset by 60 bps of leverage associated with higher sales. The higher expenses for the three-month period ended March 31, 2022 are primarily due to the prior year reduction in the fair value of the Flawless business acquisition liability of $19.0.

Other (income) expense, net was nominal for the three months ended March 31, 2022 and 2021.

Interest expense for the three months ended March 31, 2022 increased $2.6 to $16.6, as compared to the same period in 2021, primarily due to higher average debt outstanding.

#### Income Taxes

The effective tax rate for the three months ended March 31, 2022 was 23.2%, compared to 24.2% in the same period in 2021. The decrease in the tax rate is primarily due to higher stock option exercises.

### 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 structure. 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 |

22

The Corporate segment income consists of equity in earnings of affiliates. As of March 31, 2022, 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 $2.4 and $2.6 for the three months ended March 31, 2022 and 2021, respectively, and 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 months ended March 31, 2022 and March 31, 2021 are as follows:

| Net Sales(1) | Consumer Domestic | Consumer International | SPD | Corporate(3) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| **First Quarter of 2022** | **$995.1** | **$214.6** | **$87.5** | **$0.0** | **$1,297.2** |
| First Quarter of 2021 | 942.4 | 216.4 | 80.1 | 0.0 | 1,238.9 |
| **Income before Income Taxes(2)** |  |  |  |  |  |
| **First Quarter of 2022** | **$222.7** | **$29.6** | **$11.5** | **$2.4** | **$266.2** |
| First Quarter of 2021(4) | 240.9 | 38.2 | 9.3 | 2.6 | 291.0 |

(1) Intersegment sales from Consumer International to Consumer Domestic, which are not reflected in the table, were $4.8 and $2.6 for the three months ended March 31, 2022 and March 31, 2021, respectively.

(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 months ended March 31, 2022 and March 31, 2021.

(4) 2021 results include a $19.0 reduction of SG&A expenses to reduce the Flawless business acquisition liability, of which $16.1 was recorded to Consumer Domestic and $2.9 was recorded to Consumer International.

Product line revenues from external customers are as follows:

|  | Three Months Ended March 31, 2022 | March 31, 2021 |
| --- | ---: | ---: |
| Household Products | **$520.5** | $495.2 |
| Personal Care Products | **474.6** | 447.2 |
| Total Consumer Domestic | **995.1** | 942.4 |
| Total Consumer International | **214.6** | 216.4 |
| Total SPD | **87.5** | 80.1 |
| **Total Consolidated Net Sales** | **$1,297.2** | $1,238.9 |

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

### Consumer Domestic

Consumer Domestic net sales in the first quarter of 2022 were $995.1, an increase of $52.7 or 5.6% as compared to the same period in 2021. The components of the net sales change are the following:

| Net Sales - Consumer Domestic | Three Months Ended March 31, 2022 |
| --- | ---: |
| Product volumes sold | (6.0%) |
| Pricing/Product mix | 8.7% |
| Acquired product lines (1) | 2.9% |
| **Net Sales increase** | **5.6%** |

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

The increase in net sales for the three months ended March 31, 2022, reflects the impact of the TheraBreath® Acquisition, and higher net sales in ZICAM™ zinc supplements, OXICLEAN® Versatile Stain Remover, BATISTE® dry shampoo, ARM & HAMMER® Cat Litter and ARM & HAMMER® Liquid Detergent, offset by declines in FLAWLESS® Hair Removal Products, WATERPIK® Shower Heads, and XTRA® Liquid Detergent.

In recent years our TROJAN business, specifically the condom category, had not grown and competition has increased. Social distancing requirements due to the COVID-19 pandemic had further negatively impacted the business. As a result, the TROJAN business had experienced stagnant sales and profits resulting in a reduction in expected future cash flows which eroded a portion of the excess between the fair and carrying value of the tradename. This indefinite-lived intangible asset may be susceptible to impairment risk and a continued decline in fair value could trigger a future impairment charge of the TROJAN tradename.

While management 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, TROJAN has experienced a recovery in sales and profits 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 with the adoption of vaccines, the reduction of social distancing restrictions and the benefit of management strategies to improve sales and profitability.

Consumer Domestic income before income taxes for the first quarter of 2022 was $222.7, an $18.2 decrease as compared to the first quarter of 2021. The decrease is due primarily to higher manufacturing and distribution expenses of $52.5, the impact of lower sales volumes of $16.6, higher SG&A expenses of $15.8 (including the prior year reduction in the fair value of the Flawless business acquisition liability of $16.1), higher marketing expenses of $4.9 and higher interest and other expenses of $2.4, partially offset by a favorable price/mix of $73.9.

### Consumer International

Consumer International net sales were $214.6 in the first quarter of 2022, a decrease of $1.8 or 0.8% as compared to the same period in 2021. The components of the net sales change are the following:

| Net Sales - Consumer International | Three Months Ended March 31, 2022 |
| --- | ---: |
| Product volumes sold | (3.6%) |
| Pricing/Product mix | 3.9% |
| Foreign exchange rate fluctuations | (1.9%) |
| Acquired product lines (1) | 0.8% |
| **Net Sales decrease** | **(0.8%)** |

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

Excluding the impact of foreign exchange rates, sales were higher in the first quarter ended March 31, 2022 for STERIMAR®, BATISTE, OXICLEAN, and VITAFUSION and L’IL CRITTERS gummy vitamins in the Global Markets Group (“GMG”) business.

The positive GMG performance was offset by volume declines in Canada, Mexico, France and UK. International Growth was also negatively impacted by international supply chain issues and laundry portfolio decisions in Canada.

Consumer International income before income taxes was $29.6 in the first quarter of 2022, an $8.6 decrease as compared to the first quarter of 2021. Higher manufacturing and commodity costs of $6.0, higher SG&A expenses of $3.4 (partially due to the prior year reduction in fair value of the Flawless business acquisition liability of $2.9), the impact of lower sales volumes of $3.2, unfavorable foreign exchange rates of $1.8 and higher interest and other expenses of $0.2, were partially offset by a favorable price/mix of $5.0 and lower marketing expenses of $0.8.

### Specialty Products (“SPD”)

SPD net sales were $87.5 in the first quarter of 2022, an increase of $7.4 or 9.2% as compared to the same period in 2021. The components of the net sales change are the following:

| Net Sales - SPD | Three Months Ended March 31, 2022 |
| --- | ---: |
| Product volumes sold | 1.1% |
| Pricing/Product mix | 8.1% |
| **Net Sales increase** | **9.2%** |

Net sales increased in the first quarter of 2022 primarily due to higher pricing in our dairy and specialty chemicals segments in response to rising costs and higher volumes for our non-dairy segment.

SPD income before income taxes was $11.5 in the first quarter of 2022, an increase of $2.2 as compared to the same period in 2021, due to favorable price/product mix of $6.5, a $0.9 benefit from higher volumes, offset by unfavorable manufacturing costs of $4.5, higher SG&A costs of $0.4, and higher other expenses of $0.3.

### Corporate

The Corporate segment includes equity in earnings of affiliates from Armand and ArmaKleen in the three months of 2022 and 2021. The Corporate segment income before income taxes was $2.4 in the first quarter of 2022, as compared to $2.6 in the same period in 2021.

### 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 March 31, 2022, we had $174.4 in cash and cash equivalents, and approximately $896.0 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, 2021 (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, value focused portfolio and strong balance sheet position us to manage our business through these challenges. 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.

On October 28, 2021, the Board authorized a new share repurchase program, under which we 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 replaced 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 did 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 its incentive plans.

In December 2021, we executed open market purchases of 1.8 million shares for $170.3 million, inclusive of fees, of which $100.0 million was purchased under the evergreen share repurchase program and $70.3 million was purchased under the 2021 Share Repurchase Program. In December 2021, we also entered into an accelerated share repurchase ("ASR") contract with a commercial bank to purchase Common Stock. We paid $200.0 to the bank, inclusive of fees, and received an initial delivery of shares equal to $180.0, or 1.8 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 2022, the bank delivered an additional 0.2 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 2.0 million shares were purchased under the 2021 Share Repurchase Program.

As a result of our recent stock repurchases, there remains $729.7 of share repurchase availability under the 2021 Share Repurchase Program as of March 31, 2022.

On January 28, 2022, the Board declared a 4% increase in the regular quarterly dividend from $0.2525 to $0.2625 per share, equivalent to an annual dividend of $1.05 per share. The increase raises the annual dividend payout from $248.0 to approximately $255.0.

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 $200.0 in 2022 primarily for manufacturing capacity investments in laundry, litter and vitamins to support expected future sales growth. 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

|  | Three Months Ended March 31, 2022 | March 31, 2021 |
| --- | ---: | ---: |
| Net cash provided by operating activities | **$152.8** | $100.2 |
| Net cash used in investing activities | **$(15.7)** | $(30.0) |
| Net cash used in financing activities | **$(202.6)** | $(125.0) |

**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 first three months ended March 31, 2022 increased by $52.6 to $152.8 as compared to $100.2 in the same period in 2021 due to a decrease in working capital partially offset by lower cash earnings (net income adjusted for non-cash items). The decrease in working capital is primarily related to the change in accruals related to incentive compensation partially offset by higher inventory levels to support service 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 March 31, 2022 and 2021:

|  | As of March 31, 2022 | March 31, 2021 | Change |
| --- | ---: | ---: | ---: |
| Days of sales outstanding in accounts receivable ("DSO") | **28** | 29 | (1) |
| Days of inventory outstanding ("DIO") | **69** | 68 | 1 |
| Days of accounts payable outstanding ("DPO") | **80** | 74 | (6) |
| Cash conversion cycle | **17** | 23 | (6) |

Our cash conversion cycle (defined as the sum of DSO and DIO less DPO) which is calculated using a two-period average method, decreased 6 days from the prior year due to payable term extensions. 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 three months of 2022 was $15.7, primarily reflecting $15.6 for property, plant and equipment additions. Net cash used in investing activities during the first three months of 2021 was $30.0, primarily reflecting $26.3 for property, plant and equipment additions.

**Net Cash Used in Financing Activities –** Net cash used in financing activities during the first three months of 2022 was $202.6 reflecting $149.9 of net debt payments, $63.7 of cash dividend payments, partially offset by $11.0 of proceeds from stock option exercises. Net cash used in financing activities during the first three months of 2021 was $125.0, reflecting $69.0 of net debt payments and $61.9 of cash dividend payments, partially offset by $5.9 of proceeds from stock option exercises.

## Market risk

As filed, 205 characters.

### 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.

## Controls and procedures

As filed, 7,832 characters.

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 on the global economy of the military conflict between Russia and Ukraine, including the impact of export controls and other economic sanctions; the impact of continued shifts in consumer behavior, including accelerating shifts to on-line shopping; unanticipated increases in raw material and energy prices, including as a result of the military conflict between Russia and Ukraine; 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”).

## Risk factors

As filed, 252 characters.

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.

Filed Apr 28, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-006478. Last ingested by Listed: Nov 13, 2026, 16:10 ET. No prices; not investment advice.