# Church & Dwight Co Inc: Form 10-K for the period ended Dec 31, 2020 - Company: [Church & Dwight Co Inc](/companies/chd.md) (CIK 313927) - Form: 10-K - Filed: 2021-02-18 - Accepted by EDGAR: Feb 18, 2021, 21:14 ET - Period: 2020-12-31 - Accession: 0001564590-21-006669 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/313927/000156459021006669/chd-10k_20201231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/313927/000156459021006669/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2020-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2020-10-01 to 2020-12-31 | $1.30bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 12 months, 2020-01-01 to 2020-12-31 | $4.90bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2020-01-01 to 2020-12-31 | $2.68bn | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2020-10-01 to 2020-12-31 | $557.4m | us-gaap:GrossProfit | | Gross profit | 12 months, 2020-01-01 to 2020-12-31 | $2.21bn | us-gaap:GrossProfit | | Research and development | 12 months, 2020-01-01 to 2020-12-31 | $102.6m | us-gaap:ResearchAndDevelopmentExpense | | Selling, general and administrative | 12 months, 2020-01-01 to 2020-12-31 | $593.3m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 3 months, 2020-10-01 to 2020-12-31 | $190.6m | us-gaap:OperatingIncomeLoss | | Operating income | 12 months, 2020-01-01 to 2020-12-31 | $1.03bn | us-gaap:OperatingIncomeLoss | | Interest expense | 12 months, 2020-01-01 to 2020-12-31 | $61.0m | us-gaap:InterestExpense | | Income tax | 12 months, 2020-01-01 to 2020-12-31 | $187.9m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2020-10-01 to 2020-12-31 | $150.2m | us-gaap:ProfitLoss | | Net income | 12 months, 2020-01-01 to 2020-12-31 | $785.9m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2020-10-01 to 2020-12-31 | $0.59 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 12 months, 2020-01-01 to 2020-12-31 | $3.12 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2020-10-01 to 2020-12-31 | $0.61 | us-gaap:EarningsPerShareBasic | | Basic EPS | 12 months, 2020-01-01 to 2020-12-31 | $3.18 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2020-01-01 to 2020-12-31 | 252,200,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2020-01-01 to 2020-12-31 | $990.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2020-01-01 to 2020-12-31 | $98.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2020-01-01 to 2020-12-31 | $237.3m | us-gaap:PaymentsOfDividends | | Share repurchases | 12 months, 2020-01-01 to 2020-12-31 | $300.0m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2020-12-31 | $183.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2020-12-31 | $1.11bn | us-gaap:AssetsCurrent | | Total assets | at 2020-12-31 | $7.41bn | us-gaap:Assets | | Current liabilities | at 2020-12-31 | $1.39bn | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2020-12-31 | $4.39bn | us-gaap:Liabilities | | Long-term debt | at 2020-12-31 | $1.81bn | us-gaap:LongTermDebtNoncurrent | | Short-term borrowings | at 2020-12-31 | $351.4m | us-gaap:ShortTermBorrowings | | Shareholders' equity | at 2020-12-31 | $3.02bn | us-gaap:StockholdersEquity | ## Business As filed, 47,290 characters. ### OVERVIEW OF BUSINESS We were founded in 1846 and incorporated in Delaware in 1925. We develop, manufacture and market a broad range of consumer household and personal care products and specialty products focused on animal and food production, chemicals and cleaners. Our consumer products marketing efforts are focused principally on our 13 “power brands.” These well-recognized brand names include ARM & HAMMER® baking soda, cat litter, laundry detergent, carpet deodorizer and other baking soda based products; TROJAN® condoms, lubricants and vibrators; OXICLEAN® stain removers, cleaning solutions, laundry detergents and bleach alternatives; SPINBRUSH® battery-operated toothbrushes; FIRST RESPONSE® home pregnancy and ovulation test kits; NAIR® depilatories; ORAJEL® oral analgesic; XTRA® laundry detergent; L’IL CRITTERS® and VITAFUSION® gummy dietary supplements for children and adults, respectively; BATISTE® dry shampoo; WATERPIK® water flossers and showerheads, FLAWLESS® products and ZICAM® cold remedy products. We sell our consumer products under a variety of brands through a broad distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar and other discount stores, pet and other specialty stores and websites and other e-commerce channels, all of which sell our products to consumers. We sell our specialty products to industrial customers, livestock producers and through distributors. #### Sustainability and Environmental, Social and Governance (“ESG”) We believe that sustainable operations are both financially and operationally beneficial to our business, and critical to the health of the communities in which we operate. Accordingly, each year we publish a Sustainability Report that discloses our business and corporate responsibility commitments by detailing our environmental, social and governance performance, including our metrics and targets and other key components of our sustainability platform. Our 2019 Sustainability Report is available on our web site at https://churchdwight.com/responsibility/sustainability-reports.aspx, and our 2020 Sustainability Report will be available in April 2021 (the “2020 Sustainability Report” and together with the 2019 Sustainability Report, the “Sustainability Reports”). References to our Sustainability Reports are for informational purposes only and neither the Sustainability Reports nor the other information on our website is incorporated by reference into this Annual Report on Form 10-K. See pages 11-12 in this Item 1 of this Annual Report under “Employees and Human Capital” for a discussion of our human capital management. Our operations are subject to federal, state, local and foreign laws, rules and regulations relating to environmental concerns, including air emissions, wastewater discharges, solid and hazardous waste management activities, and the safety of our employees. We endeavor to take actions necessary to comply with such regulations. These steps include periodic environmental and health and safety audits of our facilities. The audits, conducted by independent firms with expertise in environmental, health and safety compliance, include site visits at each location, as well as, a review of documentary information, to determine compliance with such federal, state, local and foreign laws, rules and regulations. However, our environmental priorities extend beyond our compliance efforts. Our global sustainability platform is one of our leadership strategies, which we have derived from our heritage and organizational values. The following six pillars are the core focus of our sustainability efforts, and are identified with their corresponding primary ESG priorities: - Our Brands: Delight consumers with our brands and contribute towards a more sustainable world (Environmental and Social). - Products: Provide safe and effective products for consumers and the environment (Environmental and Social). - Packaging: Utilize consumer friendly and environmentally responsible packaging (Environmental). - Employees and Communities: Embrace the principles of diversity, equity and inclusion and good corporate citizenship and social responsibility within the communities we can impact (Social). - Responsible Sourcing: Improve our suppliers’ environmental, labor, health & safety and ethical practices (Environmental and Social). - Environment: Minimize environmental impact of our global operations, with a focus on increased renewable energy usage, reduced water consumption, greenhouse gas emissions and solid waste to landfills (Environmental). Our governance focus includes the processes, resources and systems in support of our sustainability and ESG efforts, as well as our corporate governance, which is separate from our sustainability program, all as will be described in our Proxy Statement for our upcoming Annual Meeting of Stockholders under the caption “Sustainability and ESG” and in our 2020 Sustainability Report. Our Corporate Issues Council (the “Council”), comprised of senior executives representing all of our key functional areas, guides the integration of sustainability with all parts of our business and drives continuous improvement in our sustainability approach and performance. The Council takes the lead in defining and implementing our sustainability strategies across the six pillars of our global sustainability program. Our Board of Directors, acting principally through its Governance & Nominating Committee, oversees our sustainability and ESG efforts, with that Committee and the Compensation & Organization and Audit Committees each focusing on specified areas of sustainability and ESG. Our Independent Lead Director is responsible for ensuring that stockholder sustainability requests, recommendations and proposals are evaluated by the Governance & Nominating Committee, additional committees within the Board as appropriate, and then by the Board of Directors, if needed. In 2020, our continued progress in key areas of sustainability earned recognition from various third parties, Newsweek’s America’s Most Responsible Companies Top 100 List, the EPA’s Green Power Partnership Top 100 list, and the FTSE4Good Index Series, among others. We use the standards and guidelines of the Global Reporting Initiative, Sustainability Accounting Standards Board industry specific standards and the Task Force on Climate-related Financial Disclosures to inform our sustainability and ESG disclosures included in this Annual Report, our Proxy Statement and our Sustainability Reports. The “materiality” thresholds in those standards and guidelines may differ from the concept of “materiality” for purposes of the federal securities laws and disclosures required by the Commission’s rules in this Annual Report. Moreover, the inclusion of sustainability and ESG disclosures in this Annual Report and in our other filings with the Commission does not necessarily imply that we consider them to be material for purposes of the federal securities laws or the Commission’s rules and regulations governing such disclosure. ### FINANCIAL INFORMATION ABOUT SEGMENTS AND PRINCIPAL PRODUCTS As discussed in more detail below, we operate in three principal segments: Consumer Domestic, Consumer International, and our Specialty Products Division (“SPD”). Refer to Note 17 to the consolidated financial statements included in this Annual Report and the discussion in “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information concerning the results of each of our segments. All domestic brand “rankings” contained in this Annual Report are based on dollar share rankings from ACNielsen AOC (All Outlets Combined) for the 52 weeks ended December 31, 2020. Foreign brand “rankings” are derived from several sources. #### Recent Acquisitions 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”). We 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 additional amount 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 us with a combination of cash on hand and short-term borrowings. The ZICAM business is managed in the Consumer Domestic segment. ### Consumer Domestic Our founders first marketed sodium bicarbonate, otherwise known as baking soda, in 1846 for use in home baking. Today, this product has a wide variety of uses in the home, including as a refrigerator and freezer deodorizer, scratch-free cleaner and deodorizer for kitchen surfaces and cooking appliances, bath additive, dentifrice, cat litter deodorizer and swimming pool pH stabilizer. We specialize in baking soda-based products, as well as other products which use the same raw materials or technology or which are sold in the same markets. Our Consumer Domestic segment includes each of our 13 power brands, as well as other well-known brands and household and personal care products. We divide the Consumer Domestic segment into household and personal care product groups. #### Household Products In 2020, household products constituted approximately 54% of our Consumer Domestic sales and approximately 42% of our consolidated net sales. ARM & HAMMER Baking Soda remains the number one leading brand of baking soda in terms of consumer recognition of the brand name and reputation for quality and value. The cleaning and deodorizing properties of baking soda have led to the development of numerous baking soda-based household products. For example, we market ARM & HAMMER FRIDGE FRESH®, a refrigerator deodorizer equipped with a baking soda filter to help keep food tasting fresher, and ARM & HAMMER Carpet Deodorizer. Our other primary household products include laundry detergents marketed under the ARM & HAMMER, OXICLEAN and XTRA brands, fabric softener sheets marketed under the ARM & HAMMER brand, cat litter under our ARM & HAMMER brand, and household cleaning products under the CLEAN SHOWER®, SCRUB FREE®, ORANGE GLO®, OXICLEAN and KABOOM® brands. Our laundry detergents constitute our largest consumer business, measured by net sales. #### Personal Care Products In 2020, personal care products constituted approximately 46% of our Consumer Domestic sales and approximately 35% of our consolidated net sales. Our personal care business was founded on the unique strengths of our ARM & HAMMER trademark and baking soda technology. We have expanded our personal care business through the acquisition of antiperspirants, oral care products, depilatories, reproductive health products, oral analgesics, nasal saline moisturizers, and dietary supplements under a variety of other leading brand names. ARM & HAMMER Baking Soda, when used as a dentifrice, helps whiten and polish teeth, removes plaque and leaves the mouth feeling fresh and clean. These properties led to the development of a complete line of sodium bicarbonate-based dentifrice products that are marketed and sold nationally primarily under the ARM & HAMMER brand name. Our other personal care products include antiperspirants and deodorants under the ARRID® and ARM & HAMMER brands, condoms under the TROJAN brand (the number one condom brand in the U.S.), battery-operated toothbrushes under the SPINBRUSH brand (the number two leading brand of battery-operated toothbrushes in the U.S. in 2020), water flossers and showerheads under the WATERPIK brand (the number one water flosser and replacement showerhead brand in the U.S.), home pregnancy and ovulation test kits under the FIRST RESPONSE brand (the number one selling brand in the U.S.), hair-removal products under the NAIR, FLAWLESS and FINISHING TOUCH brands, oral analgesics and oral care products under the ORAJEL brand (the market leader in the toothache, canker sore, and children’s teething categories in the U.S.), children’s gummy dietary supplements under the L’IL CRITTERS brand and adult gummy dietary supplements under the VITAFUSION brand (both number one leading brands in their respective categories), ZICAM brand (the #1 zinc supplement in the United States in the vitamins, minerals, and supplements cough/cold shortening category), a growing number of hair products under the BATISTE (the number one dry shampoo in the U.S.), VIVISCAL (the number one leading supplement for thinning hair), TOPPIK® (the number one leading brand of cosmetics for thinning hair), and XFUSION® brands, and nasal saline moisturizers and solutions under the SIMPLY SALINE® brand. ### Consumer International Our Consumer International segment markets a variety of personal care, household and over-the-counter products in international subsidiary markets, including Australia, Canada, France, Germany, Mexico and the United Kingdom and in over 130 global export markets around the world, including China and Japan (the “Global Markets Group” or “GMG”). Total Consumer International net sales represented approximately 17% of our consolidated net sales in 2020. Net sales of the subsidiary businesses originating in Europe, Canada, Australia and Mexico accounted for 34%, 27%, 8% and 7%, respectively, of our 2020 international net sales in this segment. No other country in which we operate accounts for more than 20% of our total international net sales and no product line accounts for more than 20% of total international net sales. Some of our U.S. power brands such as ARM & HAMMER, BATISTE, NAIR, OXICLEAN, TROJAN, L’IL CRITTERS, SPINBRUSH, WATERPIK, FLAWLESS and VITAFUSION are distributed in many of our international markets. In addition, we also export unique brands such as STERIMAR®, natural nasal decongestant out of France and FEMFRESH®, feminine hygiene portfolio out of the United Kingdom, to many countries around the world. We also market the CURASH® line of babycare products in Australia, and GRAVOL® anti-nauseant and RUB-A535 topical analgesic in Canada and other international markets. We also sell WATERPIK water flossers and showerheads in Australia, Canada, Germany, France, the United Kingdom, Mexico and in other international markets. ### Specialty Products Division Our SPD segment focuses on sales to businesses and participates in three product areas: Animal and Food Production, Specialty Chemicals and Specialty Cleaners, and accounted for approximately 6% of our consolidated net sales in 2020. #### Animal and Food Production Products Since the ARM & HAMMER Animal and Food Production business began in 1972, with its launch of ARM & HAMMER baking soda as a feed additive to help dairy cows produce more milk, we have built a leading portfolio of nutritional supplements designed to help improve the health and productivity of dairy cows. Today our portfolio of dairy nutritional supplements includes brands such as MEGALAC® rumen bypass fat– a supplement made from natural oils – which enables cows to maintain energy levels during the period of high milk production, resulting in improved milk yields. In addition, we market a line of high-quality protein and amino acid products, including BIO-CHLOR® and FERMENTEN®, which are designed to help reduce health issues associated with calving, as well as provide needed protein to ensure proper growth and milk production. Over the last five years, we have expanded our product offerings to include unique prebiotics and probiotics. CELMANAX® Refined Functional Carbohydrate is a yeast-based prebiotic that helps ensure a well-functioning gastrointestinal track in dairy cows, beef cattle, poultry and other livestock. On May 1, 2017, we acquired the Agro Biosciences, Inc. business and we now market the CERTILLUS® family of probiotics products in the poultry, dairy, beef and swine industries. On March 8, 2018, we acquired Passport Food Safety Solutions, Inc., focused on providing pre- and post-harvest food safety solutions for beef, poultry, and swine primarily for the application to carcasses to reduce food borne pathogens. #### Specialty Chemicals Our specialty chemicals business primarily encompasses the manufacture, marketing and sale of sodium bicarbonate in a range of grades and granulations for use in industrial markets. In industrial markets, sodium bicarbonate is used by other manufacturing companies as a leavening agent for commercial baked goods, as an antacid in pharmaceuticals, as a carbon dioxide release agent in fire extinguishers, as an alkaline agent in swimming pool chemicals, and as a buffer in kidney dialysis. We and Occidental Chemical Corporation are equal partners in a joint venture, Armand Products Company, which manufactures and markets potassium carbonate and potassium bicarbonate for sale in domestic and international markets. The potassium-based products are used in a wide variety of applications, including agricultural products, specialty glass and ceramics, and potassium silicates. Armand also manufactures a potassium carbonate-based animal feed additive for sale by us in the dairy industry, described above under “Animal and Food Production Products.” Armand’s results are included in our Corporate segment. #### Specialty Cleaners We also provide a line of cleaning and deodorizing products for use in commercial and industrial applications such as office buildings, hotels, restaurants and other facilities. We and Safety-Kleen Systems, Inc. (“Safety-Kleen”) are equal partners in a joint venture, ARMAKLEEN®, which has built a specialty cleaning products business based on our technology and Safety-Kleen’s sales and distribution organization. In North America, this joint venture distributes our proprietary product line of aqueous cleaners along with our ARMEX® blast media line, which is designed for the removal of a wide variety of surface coatings. These results are included in our Corporate segment. ### COMPETITION We compete in the household and personal care consumer product categories, which are highly innovative categories, characterized by a continuous flow of new products and line extensions, and require significant advertising and promotion. We compete in these categories primarily on the basis of product innovation and performance, brand recognition, price, value and other consumer benefits. Consumer products, particularly laundry and dietary supplements, are subject to significant price competition. As a result, we, from time to time, may need to reduce the prices for some of our products to respond to competitive and customer pressures and to maintain market share. Product introductions typically involve heavy marketing and trade spending in the year of launch, and we usually are not able to determine whether the new products and line extensions will be successful until a period of time has elapsed following the introduction of the new products or the extension of the product line. Because of the competitive retail environment, we face pricing pressure from our retail customers and customers selling through other channels, particularly high-volume retail customers including, internet-based retailers, who have increasingly sought to obtain pricing concessions or better trade terms that could reduce our margins. Furthermore, if we are unable to maintain price or trade terms acceptable to our customers, they could increase product purchases from competitors and reduce purchases from us, which would harm our sales and profitability. Our competitors in the Consumer Domestic and Consumer International segments include, among others, Procter & Gamble Company (“P&G”), The Clorox Company, Colgate-Palmolive Company, S.C. Johnson & Son, Inc., Nestle Purina PetCare Company, Henkel, Reckitt Benckiser Group plc, Johnson & Johnson, Ansell Limited, Pfizer Inc., Bayer AG, Alere Inc., NBTY, Inc., Koninklijke Philips N.V., Unilever PLC and Pharmavite LLC. Many of these companies have greater financial resources than we do and have the capacity to outspend us in their attempts to gain market share. In addition, the growing number of sales channels and business models, such as niche brands, internet-only brands and discounter channels, have increased competition in certain product categories, such as oral care, from less well capitalized competitors. Competition within our animal and food production and our specialty chemicals product lines is intense. The specialty chemicals business operates in a competitive environment influenced by capacity utilization, customers’ leverage and the impact of raw material and energy costs. Product introductions typically involve introductory educational costs in the year of launch, and we usually are not able to determine whether new products and line extensions will be successful until a period of time has elapsed following the introduction of new products or the extension of the product lines. Our key competitors with respect to our SPD segment are Cargill Incorporated, Lallemand Inc., Solvay Chemicals, Inc., Genesis Alkali and Natural Soda, Inc. For additional discussion of the competitive environment in which we conduct our business, see Item 1A, "Risk Factors." ### DISTRIBUTION OF OUR PRODUCTS Our Consumer Domestic and Consumer International segments products are marketed primarily through a broad distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar and other discount stores, pet and other specialty stores, and websites and other e-commerce channels, all of which sell our products to consumers. The Consumer Domestic Segment employs a sales force based regionally throughout the U.S. and utilizes the services of independent brokers, who represent our products in the food, mass, pet, dollar, club, and numerous other classes of trade. Our Consumer International segment conducts business through subsidiaries and global export markets. Our subsidiaries employ local sales and marketing teams that manage the retailer and trade relationships while export sales and marketing professionals also manage an extensive distributor network in our global export markets. Our products are stored in our plants and third-party owned warehouses and are either delivered by independent trucking companies or picked up by customers at our facilities. SPD markets sodium bicarbonate and other chemicals to industrial and agricultural customers primarily throughout the U.S. and Canada. Distribution is accomplished through a dedicated sales force supplemented by manufacturers’ representatives and independent distributors. Our products in this segment are stored in our plants and public warehouses and are either delivered by independent trucking companies or picked up by customers at our facilities. ### SEASONALITY Our business is generally not seasonal, although the Consumer Domestic and Consumer International segments are affected by sales of SPINBRUSH battery-operated toothbrushes and WATERPIK water flossers (which typically are higher during the fall, in advance of the holiday season), sales of NAIR depilatories and waxes (which typically are higher in the spring and summer months), sales of VITAFUSION and L’IL CRITTERS dietary supplements and ZICAM cold remedy products (which typically are slightly higher in the fourth quarter of each year, in advance of the cold and flu season and renewed commitments to health), and sales of FLAWLESS (which are typically higher in the second half of the year). In SPD, several of our Animal and Food Production products experience higher demand in warmer weather months creating higher seasonal demand in the second and third quarters of the year. ### RAW MATERIALS AND SOURCES OF SUPPLY We manufacture sodium bicarbonate for our consumer and specialty products businesses at our plants located at Green River, Wyoming and Old Fort, Ohio. The primary source of soda ash, a basic raw material used in the production of sodium bicarbonate, is the mineral trona, which is found in abundance in southwestern Wyoming near our Green River plant. We have adequate trona reserves under mineral leases to support our sodium bicarbonate requirements for the foreseeable future. We are a party to a partnership agreement with Tata Chemicals (Soda Ash) Partners, which mines and processes trona reserves in Wyoming. We fulfill a substantial amount of our soda ash requirements through the partnership and related supply and services agreements, enabling us to achieve some of the economies of an integrated business capable of producing sodium bicarbonate and related products from the basic raw material. We also have an agreement for the supply of soda ash from another company. The partnership agreement and other supply agreements between the Tata Chemicals (Soda Ash) Partners and us are terminable upon two years notice by either of us. We believe that sufficient alternative sources of soda ash supply are available. We believe that ample sources of raw materials are available for all our other major products. Detergent chemicals are used in a variety of our products and are available from a number of sources. Bottles, paper products and clay are available from multiple suppliers, although we choose to source most of these materials from single sources under long-term supply agreements in order to gain favorable economies of scale. We also use certifiable sustainable palm oil derivatives in a number of products, including primarily in our rumen bypass fats products. Alternative sources of supply are available in case of the disruption or termination of the supply agreements. The cost of raw materials, including surfactants, diesel fuel and oil-based raw and packaging materials used primarily in our consumer businesses, were higher in 2020 relative to 2019, increasing our core commodity costs. Increases in the prices of certain raw materials could materially impact our costs and financial results if we are unable to pass such costs along in the form of price increases to our customers. We utilize the services of third party contract manufacturers around the world for certain products. ### PATENTS AND TRADEMARKS Our trademarks appear in upper case letters throughout this Annual Report. The majority of our trademarks are registered with either the U.S. Patent and Trademark Office or with the trademark offices of many foreign countries. The ARM & HAMMER trademark has been used by us since 1867 and is a valuable asset and important to the successful operation of our business. Our products are sold under many other valuable trademarks held by us, including TROJAN, NAIR, ORAJEL, WATERPIK, FIRST RESPONSE, XTRA, OXICLEAN, SPINBRUSH, BATISTE, SIMPLY SALINE, L’IL CRITTERS, VITAFUSION, FLAWLESS and ZICAM. Our portfolio of trademarks represents substantial value in the businesses using the trademarks. U.S. patents are currently granted for a term of 20 years from the date the patent application is filed. Although we actively seek and maintain a number of patents, no single patent is considered significant to the business as a whole. ### CUSTOMERS AND ORDER BACKLOG In each of the years ended December 31, 2020, 2019 and 2018, net sales to our largest customer, Walmart Inc. and its affiliates (“Walmart”), were 23%, 24% and 23% respectively, of our consolidated net sales. No other customer accounted for 10% or more of our consolidated net sales in the three-year period. The time between receipt of orders and shipment is generally short, and as a result, backlog is not significant. ### GOVERNMENT REGULATION ### General Some of our products are subject to regulation by one or more U.S. agencies, including the U.S. Food and Drug Administration (“FDA”), the Environmental Protection Agency (“EPA”), the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission (“CPSC”) and foreign agencies. FDA regulations govern a variety of matters relating to our products, such as product development, manufacturing, premarket clearance or approval, labeling and distribution. The regulations adopted and standards imposed by the FDA and similar foreign agencies evolve over time and can require us to make changes in our manufacturing processes and quality systems to remain in compliance. These agencies periodically inspect manufacturing and other facilities. If we fail to comply with applicable regulations and standards, we may be subject to sanctions, including fines and penalties, the recall of products and cessation of manufacturing and/or distribution. In addition, we sell products that are subject to regulation under the Federal Insecticide, Fungicide and Rodenticide Act and the Toxic Substances Control Act, both of which are administered by the EPA. We are also subject to regulation by the FTC in connection with the content and truthfulness of our labeling, advertising, promotion, trade practices and other matters. The FTC has instituted numerous enforcement actions against companies for failure to adequately substantiate claims made in advertising or for the use of otherwise false or misleading advertising claims. These enforcement actions have resulted in consent decrees and the payment of civil penalties and/or restitution by the companies involved. Such actions can result in substantial financial penalties and significantly restrict the marketing of our products. The CPSC has jurisdiction over consumer products, regulates their safety and has authority over recalls. The CPSC administers the Poison Prevention Packaging Act and has issued regulations requiring special child resistant packaging for certain products, including pharmaceuticals, dietary supplements, and dietary substances, containing certain ingredients (e.g., iron). Our relationship with certain union employees is regulated by various agencies of the countries, states, provinces and other localities in which we sell our products. ### Medical Device Clearance and Approval To be commercially distributed in the U.S., a medical device must, unless exempt, receive clearance or approval from the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (“FDCA”). For lower risk class II devices, we must generally submit a premarket notification requesting clearance for commercial distribution known as a “510(k)” clearance. Our condoms, lubricants, contact lens solution, wound wash, home pregnancy test kits and WATERPIK professional dental products are regulated as class II devices. Some other low risk devices, including SPINBRUSH and other battery powered toothbrushes, and WATERPIK water flossers, are in class I and are generally exempted from the 510(k) requirement. To obtain 510(k) clearance, a device must be determined to be substantially equivalent in intended use and in safety and effectiveness to a benchmark device, or “predicate” that is already legally in commercial distribution. Any modification to a 510(k) cleared device that could significantly affect its safety or effectiveness, or that would constitute a change in its intended use, generally requires a new 510(k) clearance. We may determine that a new 510(k) clearance is not required, but if the FDA disagrees, it may retroactively require a 510(k) clearance and may require us to cease marketing or recall the modified device until 510(k) clearance is obtained. ### OTC Pharmaceutical We market over-the-counter (“OTC”) pharmaceutical products, such as toothpaste, antiperspirant, and oral analgesics products, that are also subject to FDA and foreign regulation. Under the U.S. OTC monograph system, selected OTC pharmaceutical products are generally recognized as safe and effective and do not require the submission and approval of a new drug application. The FDA OTC monographs include well-known ingredients and specify requirements for permitted indications, required warnings and precautions, allowable combinations of ingredients and dosage levels. Pharmaceutical products marketed under the OTC monograph system must conform to specific quality, formula and labeling requirements. Products not in the monograph system can be deemed to be unapproved new drugs and can be forced from the market. This is particularly the case for homeopathic drug products like certain ZICAM products. Both the FDA and the FTC have taken the position that homeopathic products are unapproved new drugs. Regulatory action against these products is deemed unlikely unless the products present an unreasonable safety risk. ZICAM homeopathic products are not currently perceived to pose any such risk. All facilities where OTC pharmaceutical products are manufactured, tested, packaged, stored or distributed must comply with cGMP regulations and/or regulations promulgated by competent authorities in the countries where the facilities are located. All of our pharmaceutical products are manufactured, tested, packaged, stored and distributed according to cGMP regulations. The FDA performs periodic audits to ensure that our facilities remain in compliance with all appropriate regulations. The failure of a facility to be in compliance may lead to a breach of representations made to customers or to regulatory action against us related to the products made in that facility, such as seizure, injunction or recall. Serious product quality concerns could also result in governmental actions against us that, among other things, could result in the suspension of production or distribution of our products, product seizures, loss of certain licenses or other governmental penalties, and could have a material adverse effect on our financial condition or operating results. We are required to report serious adverse events associated with the use of our OTC pharmaceutical products marketed in the U.S. We cannot predict whether new legislation regulating our activities will be enacted or what effect any legislation would have on our business. ### Medical Device and OTC Pharmaceutical Postmarket Regulation After a medical device and/or OTC pharmaceutical is commercialized, numerous regulatory requirements apply, including: - the quality system regulation, which imposes FDA current Good Manufacturing Practice (“cGMP”) requirements governing the methods used in, and the facilities and controls used for, the design, manufacture, packaging, servicing, labeling, storage, installation, and distribution of all finished medical devices and OTC intended for human use; - labeling regulations, including a prohibition on product promotion for unapproved or “off label” uses; - the medical device reporting regulation requiring a manufacturer to report to the FDA if its device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur and ongoing post-market surveillance of the product and like-products to continuously evaluate the benefit/risk over the life of the product; and - the reports of corrections and removals regulation, which requires a manufacturer to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health. ### Food Products We market baking soda and animal feed products, such as rumen fermentation enhancers and Dietary Cation-Anion Difference (“DCAD”) balancers that are also subject to FDA and foreign regulation. The Food Safety Modernization Act (“FSMA”) regulates food and animal feed products and mandates preventive controls, including hazard analysis, risk controls, supplier qualifications and controls and increased record keeping. FSMA grants the FDA the authority to require mandatory recalls for products under certain conditions. The FDA is currently in the process of establishing rules and guidance to implement the provisions of FSMA. The potential impact of these rules and applicable guidance cannot be determined now. ### Dietary Supplements The processing, formulation, safety, manufacturing, packaging, labeling, advertising, distribution, importing, selling, and storing of dietary supplements are subject to regulation by one or more federal agencies, including the FDA, the FTC, the CPSC, the EPA, and by various agencies of the states and localities in which our products are sold. The FDCA governs the composition, safety, labeling, manufacturing and marketing of dietary supplements. It is unlawful to market as a dietary supplement any article that is approved as a new drug or is authorized for investigation as a new drug for which substantial clinical investigations have been instituted and made public, unless that article was first marketed as a dietary supplement or food. The FDA has authority to effectively void that restriction through the issuance of a regulation finding the article lawful. To date, the FDA has not exercised that rulemaking authority for any article. Dietary ingredients that were not marketed in the U.S. before October 15, 1994 must be the subject of a new dietary ingredient notification submitted to the FDA at least 75 days before the initial marketing, unless the ingredient has been present in the food supply as an article used for food without being chemically altered. The notification must provide evidence of a history of use or other evidence establishing that use of the dietary ingredient is reasonably expected to be safe. The FDA may determine that notification does not provide an adequate basis to conclude that a new ingredient is reasonably expected to be safe, which could effectively prevent the marketing of the ingredient. In August of 2016, the FDA issued draft guidance governing notification of new dietary ingredients. Although the draft guidance was issued for public comment and not for implementation, it is a strong indication of the FDA’s current thinking on the topics discussed in the guidance, including the FDA’s approach to enforcement. If the FDA enforces the applicable statutes and regulations in accord with the draft guidance, that could effectively change the status of dietary ingredients that the industry has marketed as “old” dietary ingredients to “new” dietary ingredients and may require submission of a new dietary ingredient notification. A company that uses a statement of nutritional support in labeling must possess information substantiating that the statement is truthful and not misleading. If the FDA determines that a particular statement of nutritional support is an unacceptable drug claim or an unauthorized version of a health claim, or if the FDA determines that a particular claim is not adequately supported by existing scientific evidence or is otherwise false or misleading, the claim could not be used and any product bearing the claim could be subject to regulatory action. The FDA’s cGMP regulations govern the manufacturing, packaging, labeling and holding operations of dietary supplement manufacturers. As with OTC products, the FDA performs periodic audits to ensure that our dietary supplement facilities remain in compliance with all appropriate regulations. The failure of a facility to be in compliance may lead to a breach of representation made to consumers or to regulatory action against us related to the products made in that facility, seizure, injunction or recall. There is considerable uncertainty with respect to the FDA’s interpretation and implementation of the cGMP regulations. The failure of a manufacturing facility to comply with the cGMP regulations may render products manufactured in that facility adulterated and subjects those products and the manufacturer to a variety of potential FDA enforcement actions. The manufacturer, packer, or distributor of a dietary supplement marketed in the U.S. whose name appears on the label of the supplement is required to report serious adverse events associated with the use of that supplement to the FDA. Additional legislation may be introduced which, if passed, would impose substantial new regulatory requirements on dietary supplements. The effect of additional domestic or international governmental legislation, regulations, or administrative orders, if and when promulgated, cannot be determined. New legislation or regulations may require the reformulation of certain products to meet new standards and require the recall or discontinuance of certain products not capable of reformulation. ### HUMAN CAPITAL ### Overview We take great pride in fostering an enduring culture of “doing well by doing good.” By having the opportunity to make meaningful contributions to society, each of our employees can help create a stronger, more resilient company while contributing to a better world. In their everyday work, employees embody our core values of integrity, quality, commitment and innovation, and in doing so, directly contribute to our long-standing character and reputation. ### Safety and Wellness Employee safety remains our top priority. We develop and administer company-wide policies to ensure the safety of each team member and compliance with OSHA standards. In 2020, we implemented COVID-19 protocols across all locations in response to the pandemic, to ensure both the safety of our employees and compliance with federal and local requirement and guidelines. ### Our Employees As of December 31, 2020, we had approximately 5,100 global employees, an increase of approximately 300 compared to December 31, 2019. The increase is primarily due to increased staffing at our global manufacturing plants. Approximately 87% of our workforce is located in the Americas, 10% in Europe, Middle East, and Africa, and 3% in the Asia-Pacific region. About 50% of our employees are salaried and about 50% are paid hourly wages. During fiscal 2020, our turnover rate was approximately 14.9%. Our revenue per employee in fiscal 2020 was approximately $958,000. ### Diversity, Equity and Inclusion We embrace the diversity of our employees and believe that a diverse workforce reflective of our consumer base fosters innovation and cultivates an environment filled with unique perspectives. As a result, diversity, equity and inclusion (DEI”) are critical to help us meet the needs of our customers and consumers around the world. As of December 31, 2020, females represented 40.6% of our global workforce. We strive to cultivate a culture and processes that support and enhance our ability to recruit, develop and retain diverse talent at every level. We have established a Diversity & Inclusion Council that provides strategic direction, guidance and advocacy for our DEI initiatives which is led by our Chief Executive Officer and our Director, Diversity & Inclusion and includes diverse employees at every level from around the world. Our Board of Directors, acting principally through its Compensation & Organization Committee, oversees our DEI efforts. ### Hiring, Development and Retention Our talent strategy is focused on attracting the best talent and recognizing and rewarding performance, while continually developing, engaging and retaining our talented employees. We invest resources in professional development and growth as a means of improving employee performance and improving retention. This includes our bi-annual “LEAP” (Leadership Empowerment Achievement Program), which is aimed at continuous learning, professional training and development opportunities, targeted leadership development courses for new and existing leaders of different levels of seniority, tuition reimbursement, and job specific programs for our employees. ### Compensation and Benefits As part of our overall effort to attract, develop and retain talented employees, our compensation programs are designed to align the compensation of our employees with our and their performance, and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. Moreover, our policies and procedures are designed to ensure compensation is fair for employees of the same job, at the same level, location and performance. These include utilizing pay grades for appropriate job groupings, making pay decisions based on relevant factors, such as education, experience, and performance, and subjecting pay decisions to higher levels of leadership and Human Resources review to ensure those decisions are fair, equitable and align with our equal employment opportunity policies and objectives. Employees are eligible for health insurance, prescription drug benefits, dental, vision, hospital indemnity, accident, critical illness, and disability insurance, life insurance, health savings accounts, flexible spending accounts, reproductive rights coverage, and identity theft insurance. ### Communities We encourage our employees to become involved in their communities, and in 2020, our Employee Giving Fund supported our communities by providing $1.2 million to 205 deserving organizations through annual grants, disaster relief, and other monetary support. Employees purchased back-to-school supplies online to support disadvantaged youth, donated clothes and non-perishable items for clothing and food drives and provided supplies for a summer camp and holiday dinner for families in need. In addition, the Company has contributed approximately $4.8 million to our communities, which includes the retail value of product donations, delivering masks and hand sanitizers to hospitals where we live, donating to local food banks, and supporting local food establishments with gift certificates. ### PUBLIC INFORMATION We maintain a website at www.churchdwight.com and on the “Investors-Financial Information-SEC Filings” page of reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission (the “Commission”). Also available on the “Investors-Corporate Governance” page on our website are our Corporate Governance Guidelines, charters for the Audit, Compensation & Organization and Governance & Nominating Committees of our Board of Directors (the “Board”), our Code of Conduct and our Proxy Statement. We also publish a Sustainability Report that summarizes our business and corporate responsibility commitments and accomplishments including those related to our environmental, social, and governance performance. For more information regarding our sustainability and ESG initiatives please see the “Responsibility” page on our website and the discussion under the capital “Sustainability and Environmental, Social and Governance (“ESG”)” included above. Each of the foregoing is also available in print free of charge and may be obtained upon written request to: Church & Dwight Co., Inc., 500 Charles Ewing Boulevard, Ewing, New Jersey 08628, attention: Secretary. The information presented on our website is not a part of this Annual Report and the reference to our website is intended to be an inactive textual reference only. ## Risk factors As filed, 81,399 characters. The following risks and uncertainties, as well as other factors described elsewhere in this Annual Report or in our other filings with the Commission, could, individually and collectively, have a material adverse impact on our business, reputation, financial results, financial condition and/or the trading price of our Common Stock: ### Business and Operational Risks - **We face intense competition in our markets.** We face intense competition from consumer products companies, both in the U.S. and in international markets. Most of our products compete with other widely-advertised promoted and merchandised brands within each product category and from retailers, including supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar and other discount stores, pet and other specialty stores and websites and other e-commerce channels, which are increasingly offering private label and retailer-branded brands and generic non-branded products in certain categories, which typically are sold at lower prices. In China, in particular we face strong competition from local manufacturers offering both generic and branded products. The use of evolving technology to develop more complex pricing models by retailers may lead to pricing pressures in some categories. In addition, during times of economic uncertainty, consumers may purchase more “private label” or other lower price brands. These developments have increased competition in certain product categories in particular, including dietary supplements, diagnostic kits and oral analgesics. In addition to competition across all our product categories, there continues to be significant product competition in the gummy dietary supplement category, which has grown from six brands to over 55 in the last nine years. Shifting consumer behavior, including accelerated shifts to online shopping which has been accelerated by the COVID-19 pandemic, have also increased competition in e-commerce in many of our categories, from our larger legacy competitors and newer digitally native brands which have increasingly moved into consumer products and staples. Many of our competitors are large companies, including, among others, The Proctor & Gamble Company, The Clorox Company, Colgate-Palmolive Company, Henkel, Reckitt Benckiser Group plc, Johnson & Johnson, Nestle Purina PetCare Company, Ansell Limited, Alere Inc., Pfizer Inc., Bayer AG, S.C. Johnson & Son, Inc., Pharmavite LLC, Koninklijke Philips N.V., Unilever PLC and NBTY, Inc. Many of these companies have greater financial resources than we do, and, therefore, have the capacity to outspend us on advertising and promotional activities and introduce competing products more quickly and respond more effectively to changing business and economic conditions than we can. Our products generally compete on the basis of performance, brand recognition, price, value or other benefits to consumers. Significant price competition may require us to reduce the prices for some of our products or price levels that do not offset manufacturing cost increases, to respond to competitive and customer pressures and to maintain market share. Advertising, promotion, merchandising and packaging also have a significant impact on retail customer decisions regarding the brands and product lines they sell and on consumer purchasing decisions. A newly introduced consumer product (whether improved or newly developed) usually encounters intense competition requiring substantial expenditures for advertising, sales promotion and trade merchandising. If a product gains consumer acceptance, it normally requires continued advertising, promotional support and product improvements to maintain its relative market position. If our advertising, marketing and promotional programs are not effective, our sales growth may decline. - **Loss of any of our principal customers could significantly decrease our sales and profitability.** A limited number of customers account for a large percentage of our net sales and/or net sales of specific product lines. Walmart is our largest customer, accounting for approximately 23% of net sales in 2020, 24% of net sales in 2019 and 23% of net sales in 2018. Our top three customers accounted for approximately 36% of net sales each year in 2020, 2019 and 2018. We expect that a significant portion of our net sales will continue to be derived from a small number of customers and that these percentages may increase if the growth of mass merchandisers continues. As a result, changes in the strategies of Walmart or any of our other largest customers, including a reduction in the number of brands they carry or of shelf space they dedicate to private label products, could materially harm our net sales and profitability. Changes in consumer behavior, including shifting to online shopping instead of physical retail shopping as a result of the COVID-19 pandemic and other trends, could also impact our sales to our largest customers. Some of our retail customers have been forced to shut down or reduce their hours, which has impacted and may continue to impact their orders. Some of our retail customers have experienced and may experience in the future declining financial performance, which could affect their ability to pay amounts due to us on a timely basis or at all. If these impacts are prolonged, they can further increase the difficulty of planning for operations. Moreover, the use of evolving technology by our customers to develop more complex pricing models may lead to category pricing pressures. We could also lose a significant customer due to customer service levels or real or perceived product quality or appearance issues. As our business is based primarily upon individual sales orders rather than long-term contracts and most customer agreements include customer termination rights after short notice, many of our customers could reduce their purchasing levels or cease buying products from us at any time and for any reason. - **Decreases in demand for our products would decrease our sales and profitability.** Factors that can affect demand include competitors’ products, advertising and pricing actions, rates of unemployment, consumer confidence, health care costs, including increased costs as a result of changes in federal regulations, significant shifts in government policies, the deterioration of economic or trade relations between countries or regions, commodity costs, fuel and other energy costs and other economic factors affecting consumer spending behavior, including gasoline and home heating oil pricing, reduced unemployment benefits in periods of high unemployment, including the historically high unemployment rates resulting from the COVID-19 pandemic, and changes in tax policies, other effects of governmental shutdowns or a lapse of appropriations or fear of exposure to or actual impacts of a widespread disease outbreak, such as, COVID-19. In particular, we derive a substantial percentage of our revenues from sales of laundry detergent, and the continued customer demand for these products are critical to our future success. Some products have seen decreasing demand in recent years, including condoms, as a result of demographic and other changes. An increasing number of our products are more durable in nature and, therefore are more likely to be affected by consumer decisions to control spending. Changes resulting from the COVID-19 impact may also impact demand for our vitamin and supplement products. The vitamins and supplements and cold remedy categories have seen increased demand as trends in health and wellness focus have accelerated. However, demand for these products has typically increased during winter months when consumers have increased rates of flu and cold infection and increased social distancing and flu vaccination rates may have a negative impact. - **A continued change in the retail environment and changing consumer preferences could cause our sales to decline.** Despite increasing shifts to e-commerce, sales of our products remain strongest in the traditional mass merchandiser, food and drug retail stores, and our products are also sold in club stores and dollar stores channels. However, alternative retail channels, including e-commerce retailers, hard discounters, subscription services and buying clubs, have become more prevalent and the volume of consumer products that are sold through such alternative retail channels is continuing to increase, which may affect customer and consumer preferences, including in response to the COVID-19 pandemic and market dynamics, including any pricing pressures for consumer goods as retailers face added costs to build their e-commerce capacity. Further, consumer preferences continue to evolve due to a number of factors, including fragmentation of the consumer market and changes in consumer demographics, including the aging of the general population and the emergence of Millennials and Generation Z who have different spending, consumption and purchasing habits; evolving consumer concerns or perceptions regarding ESG and sustainability practices of manufacturers, including, packaging materials, such as plastic packaging, and their environmental impact; a growing demand for natural or organic products and ingredients; changing consumer sentiment toward non-local products or sources among millennials and other demographic groups; evolving consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of ingredients or substances present in certain consumer products; and concerns regarding human capital, including diversity and inclusion. The movement of consumers to online purchases of consumer products has greatly accelerated as a result of the COVID-19 pandemic, as store closures, quarantine and gathering restrictions, and social distancing efforts have reduced physical retail shopping. We and many of our competitors have increased our online sales as a result, benefiting from scale, brand recognition, and other factors. However, as consumers continue to shift their behavior, retailers may incur higher e-commerce operating costs and will seek to recover those costs by passing them onto customers and manufacturers. Additionally, we cannot predict the extent to which our increased e-commerce demand will continue as pandemic conditions change, including as a result of vaccines or reduced rates of infection. - **We rely on the policies of our key retailer customers.** Larger and increasingly consolidated retailers have increasing influence, and have sought to obtain lower pricing, special packaging inventory practices, logistics or other changes to the customer-supplier relationship as a result of this influence. To the extent we provide concessions or better trade terms to those customers, our profit margins are reduced. Further, if we are unable to effectively respond to the demands of our customers, these customers could reduce their purchases of our products and increase their purchases of products from competitors. Reductions in inventory by our customers, including as a result of consolidation in the retail industry, or these customers managing their working capital requirements, could result in reduced orders for our products and adversely affect our results of operations for financial periods affected by such reductions. Protracted unfavorable market conditions, including those caused by the COVID-19 pandemic, have caused many of our customers to more critically analyze the number of brands they sell, and reduce or discontinue certain of our product lines, particularly those products that were not number one or two in their category. In addition, private label and retail-branded products sold by retail trade chains are typically sold at lower prices than branded products. As consumers look for opportunities to decrease discretionary spending, our customers have discontinued or reduced distribution of some of our products to encourage those consumers to purchase the customers’ less expensive and, in some cases, more profitable private label and retail-branded products (primarily in the dietary supplements, diagnostic kits and oral analgesics categories). - **We have pursued and may continue to pursue strategic acquisitions and divestures.** We may continue to pursue and consummate additional acquisitions or substantial investments in complementary businesses or products in the future. Those acquisitions may be significantly larger than the ones completed in the past and may require us to increase our levels of debt, potentially resulting in us being assigned a lower credit rating. However, we may not be able to identify and successfully negotiate suitable strategic acquisition at attractive valuations, obtain financing for future acquisitions on satisfactory terms or otherwise complete future acquisitions. In recent periods, competition from other consumer products companies that are seeking similar opportunities has been particularly strong, and valuations for potential acquisition assets have been high, which has placed pressure on our ability to identify, structure and execute transactions. In addition, acquisitions and investments entail various risks, including the difficulty of entering new markets or product categories, the challenges of integrating the operations and personnel of the acquired businesses or products, the potential disruption of our ongoing business and the ongoing business of the acquired company, the need to review and, if necessary, upgrade processes and systems of the acquired company to conform to our own processes and systems and applicable legal and regulatory requirements, managing an increasingly broad and complex range of businesses and products, and, generally, our potential inability to obtain the desired financial and strategic benefits from the acquisition or investment. Any of these risks may divert management and other resources, require us to incur unanticipated costs or delay the anticipated positive impact on our business and results of the acquisition. The risks associated with assimilation are increased to the extent we acquire businesses that have stand-alone operations or businesses that are in new categories that cannot easily be integrated or operations or sources of supply outside of the U.S. and Canada, for which products are manufactured locally by third parties. Acquired companies or operations or newly-created ventures may not be profitable or may not achieve sales levels and profitability that justify the investments made. In addition, future acquisitions or investments could result in substantial cash expenditures, the potentially dilutive issuances of new equity by us or the incurrence of additional debt or business acquisition liabilities. - **Market category declines and changes to our product and geographic mix may impact the achievement of our sales growth targets, planned pricing and financial results.** A significant percentage of our revenues come from mature markets that are subject to high levels of competition. During 2020, approximately 83% of our sales were generated in U.S. markets. U.S. markets for consumer products are considered mature and commonly characterized by high household penetration, particularly with respect to our most significant product categories, such as laundry detergents, deodorizers, household cleaning products, toothpastes, dietary supplements, antiperspirants and deodorants. Our ability to quickly innovate to adapt our products to meet changing consumer demands is essential, especially in light of e-commerce significantly reducing the barriers for even small competitors to quickly introduce new brands and products directly to consumers. Even if we are successful in increasing sales within our product categories, a continuing or accelerating decline in the overall markets for our products could have a negative impact on our financial results. Some of our personal care brands have been negatively impacted by the temporary closures of certain non-essential retailers and the reduction of consumer foot traffic at retailers from which they derive a significant proportion of their sales due to the COVID-19 pandemic. FLAWLESS and some other personal care brands have also been impacted by reduced demand for discretionary consumable products by consumers due the impact of the COVID-19 pandemic, including increased unemployment and concerns about the economy. Some product categories have seen decreasing demand in recent years, including condoms, as a result of demographic and other changes. Continuing recessionary economic conditions, including after the direct impact of the pandemic has subsided, may continue to impact consumer demand for certain of our products and put downward pressure on product prices. - **New products and product line extensions may not gain widespread customer acceptance, may be otherwise discontinued, or cause sales of existing products to decline.** Our future performance and growth depend on our ability to successfully identify, develop and introduce new products, product line extensions, products in adjacent categories to our current products, and anticipate changes in consumer preferences. In addition, some of our products have shorter product life spans and depend heavily on our ability to continuously and timely introduce innovative new products to the marketplace. The successful development and introduction of new products involves substantial research, development, marketing and promotional expenditures, which we may be unable to recover if the new products do not gain widespread market acceptance. New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks. These risks include product development or launch delays, competitor actions, regulatory approval hurdles and the failure of new products and line extensions to achieve anticipated levels of market acceptance. In addition, if sales generated by new products could result in a concomitant decline in sales of existing products. Each year, we introduce new products, including launches into new “white space” categories, across the majority of our marketed brands. However, there is no assurance that our new products will continue to have widespread acceptance. From time to time, we have discontinued certain products and product lines, which resulted in returns from customers, asset write-offs and shutdown costs. We may suffer similar adverse consequences in the future to the extent we discontinue products that do not meet retailer or consumer expectations or no longer satisfy consumer demand. - **We are subject to cost overruns and delays, regulatory requirements, and miscalculations in capacity needs with respect to our expansion projects and our manufacturing facilities, as well as disruptions to our manufacturing facilities and those of our contract manufacturers and other suppliers.** From time to time, we initiate planned and unplanned expansion projects with respect to our facilities and those of our contract manufacturers and other suppliers which are subject to risks of, and we have from time to time experienced, delay or cost overruns resulting from numerous factors, including the following: shortages of equipment, materials or skilled labor; work stoppages; unscheduled delays in the delivery of ordered materials and equipment; unanticipated cost increases; difficulties in obtaining necessary permits or in meeting permit conditions; difficulties in meeting regulatory or quality requirements or obtaining regulatory approvals; availability of suppliers to certify equipment for existing and enhanced regulations; design and engineering problems; failure or delay of third party service providers; and civil unrest, labor disputes, natural disasters and pandemics. If we were to experience delays or cost overruns in the future it could result in product allocation and retailer frustration, the loss of a significant customer or customers and the material decrease of the sales of one or more of our products. In addition, we could miscalculate our anticipated capacity needs in any of our categories, such as our laundry detergent, cat litter and dietary supplement categories, including as a result of meeting the anticipated demand of our customers, or expansion into new product lines or into new markets. Additionally, the supply of our products depends on the uninterrupted efficient operation of our manufacturing facilities and those of our contract manufacturers and other suppliers and our ability to meet customer service levels, and the manufacturing of certain of our products is concentrated in one or more of our plants, contract manufacturers or other suppliers, with limited alternate qualified facilities available. Many of our manufacturing processes and those of our contract manufacturers and other suppliers are complex and present difficult technical challenges to obtain the manufacturing yields necessary to operate profitably and may require complex and specialized equipment which can be expensive to repair or replace with required lead times of up to a year. Any event that disrupts or otherwise negatively impacts manufacturing facilities, manufacturing systems or equipment, or contract manufacturers or other suppliers could result in the delivery of inferior products or our ability to meet customer requirements or service levels. As the COVID-19 pandemic continues, we could face challenges and retailer penalties in continuing to operate our facilities and delivery of on time and in full product shipments as a result of employee absenteeism or sickness, additional governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities or those of our suppliers. - **We rely on a limited number of contract manufacturers and suppliers, including sole source contract manufacturers and suppliers for certain products.** We rely on a limited number of contract manufacturers and suppliers for certain of our commodities and raw materials, including sole source suppliers for certain of our raw materials, packaging, product components, finished products and other necessary supplies. New suppliers must be qualified pursuant to our standards and may also have to be qualified under governmental and industry standards and any other standards of our customers, which can require additional investment and time. We could experience material disruptions in production and other supply chain issues, including as a result of our dependence on sole source and other suppliers, which could result in out-of-stock conditions. Moreover, our relationships with customers could be adversely affected if new or existing suppliers are unable to meet any standards set by us, government or industry regulations, or our customers, if we are unable to contract with suppliers at the quantity, quality and price levels needed for our business, if any of our key suppliers becomes insolvent, ceases or significantly reduces its operations or experiences financial distress, as a result of the COVID-19 pandemic or otherwise, or if any environmental, economic or other outside factors impact its operations. We may be unable to qualify any needed new contract manufacturers or suppliers or maintain supplier arrangements and relationships based on a variety of factors; we may be unable to contract with suppliers at the quantity, quality and price levels needed for our business; certain of our suppliers may not meet the standards of our customers or licensors; or certain of our key contract manufacturers or suppliers may become insolvent or experience other financial distress or face closure or suspension of operations. If any of these events occurs and we have failed to identify and qualify an alternative vendor, then we may be unable to meet our contractual obligations and customer expectations, which could damage our reputation and result in lost customers and sales, or the incurrence of fines or higher than expected expenses. Further, the COVID-19 pandemic has caused worldwide increases in demand for some products and reduced demand for other products, which has caused strain on our supply chain network and its ability to meet such demand. - **Volatility and increases in the price of raw and packaging materials or energy costs could erode our profit margins.** The principal raw materials and packaging used by us and certain of our suppliers and contract manufacturers include surfactants (cleaning agents), paper products and resin-based molded components. Volatility and increases in the price of raw materials, disruptions in production or transportation, or increases in the costs of energy, shipping and other necessary services, could significantly affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies, such as in manufacturing and distribution There is no assurance that we will be able to fully offset any price increases, through cost reduction programs or price increases of our products or enter locked-in price arrangements or hedge agreements, especially given the competitive environment. Sustained price increases may lead to declines in volume as competitors may not adjust their prices or customers may decide not to pay the higher prices, which could lead to sales declines and loss of market share. While we seek to project tradeoffs between price increases and volume, our projections may not accurately predict the volume impact of price increases. In addition, volatility in certain commodity markets could significantly affect our production cost. From time to time, we use hedge agreements to mitigate the volatility of commodities and diesel fuel prices. The hedge agreements are designed to add stability to product costs, enabling us to make pricing decisions and lessen the economic impact of abrupt changes in prices over the term of the contract. However, in periods of declining fuel or other commodity prices, the hedge agreements can have the effect of locking us in at above-market prices. - **Reduced availability of transportation or disruptions in our transportation network could adversely affect us.** We distribute our products and receive raw materials and packaging components primarily by truck, rail and ship and through various ports of entry. Reduced availability of trucking, rail or shipping capacity due to adverse weather conditions, natural disasters, including climatic events (including any potential effect of climate change), allocation of assets to other industries or geographies or otherwise, work stoppages, closure of operations due to government restrictions or sick employees or other impacts of pandemics, strikes or shutdowns of ports of entry or such transportation sources, could cause us to incur unanticipated expenses and impair our ability to distribute our products or receive our raw materials or packaging components in a timely manner, which could disrupt our operations, strain our customer relationships and competitive position. - **Damage to the reputation of one or more of our leading brands could adversely affect us.** Our financial success is directly dependent on the reputation and success of our brands, particularly the ARM & HAMMER, BATISTE, FIRST RESPONSE, NAIR, ORAJEL, OXICLEAN, TROJAN, L’IL CRITTERS and VITAFUSION, SPINBRUSH, WATERPIK, XTRA, FLAWLESS, and ZICAM brands. The effectiveness of these brands could suffer if our marketing plans or product initiatives do not have the desired impact on a brand’s image or its ability to attract consumers. Our brands could suffer damage to their reputations due to real or perceived, sustainability, quality or safety issues, including as a result of, among other things, significant product recalls, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients or environmental impacts (including packaging, energy and water use and waste management), or allegations of product tampering. In addition, as our sales on various e-commerce platforms grow, we may be unable to prevent sales of counterfeit, pirated, or stolen goods, unlawful or unethical sales, unauthorized resellers online, or sales in violation of our policies. Additionally, claims made in our marketing campaigns may become subject to litigation alleging false advertising and could cause us to alter our marketing plans and may affect sales or result in the imposition of significant damages against us. Widespread use of social media and networking sites by consumers has greatly increased the accessibility and speed of dissemination of negative information. Negative online consumer reviews or inaccurate posting or comments about us or our brands in the media or on any social networking website, whether accurate or inaccurate, or the disclosure of non-public sensitive information through social media, could generate adverse publicity that could damage the reputation of our brands. In addition, given the association of our individual products with us, an issue with one of our products could negatively affect the reputation of our other products, or us as a whole. - **We are subject to risks related to our expansion and international operations that could adversely affect our results of operations.** Our ability to continue to grow our sales and profits is dependent on expanding in the locations in which we already do business and entering into new geographic locations, both of which require significant resources and investments which would affect our risk profile. Further, our international operations subject us to risks customarily associated with foreign operations, including: - currency fluctuations; - widespread health emergencies, such as COVID-19 or other pandemics or epidemics; - import and export license and taxation requirements and restrictions; - trade restrictions, including local investment or exchange control regulations; - changes in tariffs and taxes; - the effect of foreign income taxes, value-added taxes and withholding taxes, including the inability to recover amounts owed to us by foreign governments, and the determination of the U.S. Internal Revenue Service (the “I.R.S.”) regarding the applicability of certain regulations, including the Foreign Account Tax Compliance Act, to our international transactions; - the possibility of expropriation, confiscatory taxation or price controls; - restrictions on or the costs related to repatriating foreign profits back to the U.S.; - political or economic instability, and civil unrest; - disruptions in the global transportation network, such as work stoppages, strikes or shutdowns of ports of entry or such other transportation sources, or other labor unrest; - compliance with laws and regulations concerning ethical business practices, including without limitation, the U.S. Foreign Corrupt Practices Act and United Kingdom Bribery Act; - the impact of the United Kingdom’s exit from the European Union; - difficulty in enforcing contractual and intellectual property rights; - regulatory and quality system requirements for certain products; and - difficulties in staffing and managing international operations. The COVID-19 pandemic has had and may continue to have a negative impact on the global economy, with reduced international travel, restrictions and social distancing measures, and recessionary conditions in many countries. Major developments in trade relations, including the imposition of new or increased tariffs by the U.S. and/or other countries, and any emerging nationalist trends in specific countries could alter the trade environment and consumer purchasing. All the foregoing risks could have a significant impact on our ability to commercialize our products on a competitive basis in international markets. In addition, changes as result of the United Kingdom’s decision and subsequent negotiations to exit the EU could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom, increased foreign exchange volatility with respect to the British pound and additional legal and economic uncertainty. Additional costs have been incurred in 2020 because of measures implemented to address or mitigate risks. There is a risk that the exit will cause a material rise in the cost of doing business in the UK. Moreover, in all foreign jurisdictions in which we operate, we are subject to laws and regulations that govern foreign investment, foreign trade and currency exchange transactions. The recent imposition of tariffs on products imported from certain countries has introduced greater uncertainty with respect to trade policies and government regulations affecting trade between the U.S. and other countries. Major developments in trade relations, including the imposition of new or increased tariffs by the U.S. and/or other countries, and any emerging nationalist trends in specific countries could alter the trade environment and consumer purchasing behavior which, in turn, could have a material effect on our balance sheet and results of operations. All the foregoing risks could have a significant impact on our ability to commercialize our products on a competitive basis in international markets and may have a material adverse effect on our results of operations or financial position. - **Failure to effectively utilize or successfully assert intellectual property rights, and the loss or expiration of such rights, could materially adversely affect our competitiveness. Infringement by us of third-party intellectual property rights could result in costly litigation and/or the modification or discontinuance of our products.** The market for our products depends to a significant extent upon the value associated with our trademarks and brand names. We own the material trademarks and brand names used in connection with the marketing and distribution of our major products both in the U.S. and in other countries. While we hold several valuable patents on our products, they may not serve as an effective barrier to entry for new competitors. Accordingly, we rely on trademark, trade secret, patent and copyright laws to protect our intellectual property rights. Although most of our material intellectual property is registered in the U.S. and in certain foreign countries in which we operate, we cannot be sure that our intellectual property rights will be sufficient or effectively utilized or, if necessary, successfully asserted. There is a risk that we will not be able to obtain and perfect our own intellectual property rights, or, where appropriate, license from others intellectual property rights necessary to support new product introductions. We cannot be sure that these rights, if obtained, will not be invalidated, circumvented or challenged in the future, and we could incur significant costs in connection with legal actions relating to such rights. In addition, even if such rights are obtained in the U.S., the laws of some of the other countries in which our products are or may be sold do not protect intellectual property rights to the same extent as the laws of the U.S. If other parties infringe our intellectual property rights, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers associate with our brands and harm our sales. Our failure to perfect or successfully assert intellectual property rights could make us less competitive and could have a material adverse effect on our business, operating results and financial condition. In addition, if our products are found to infringe intellectual property rights of others, the owners of those rights could bring legal actions against us claiming substantial damages for past infringement and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for damages from past infringement, we could be required to obtain a license in order to continue to manufacture or market the affected products, potentially adding significant costs. We might not prevail in any action brought against us or we may be unsuccessful in securing any license for continued use and therefore have to discontinue the marketing and sale of a product. - **Impairment of our goodwill and other long-lived intangible and tangible assets may result in a reduction in net income.** We have a material amount of goodwill, trademarks and other intangible assets, as well as other long-lived tangible assets, which are periodically evaluated for impairment in accordance with current accounting standards. Declines in our profitability and/or estimated cash flows related to specific intangible assets, as well as potential changes in market valuations for similar assets and market discount rates, has resulted in impairment charges from time to time, and may result in future impairment charges. ### Regulatory and Litigation Risks - **We may be subject to product liability claims, withdrawals or recalls or other legal proceedings and from time to time we are involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense.** From time to time, we are subject to product liability or other product-related claims. We may be required to pay for losses or injuries actually or purportedly caused by our products, including losses or injuries caused by raw materials or other components provided by third party suppliers that are included in our products. Claims could be based on allegations that, among other things, our products contain contaminants, are improperly tested, labeled or designed, or provide inadequate instructions regarding their use or inadequate warnings of potential dangers related to their use. Whether or not successful, product liability claims could result in negative publicity that could harm our sales and operating results and the reputation of our brands. In addition, if one of our products is found to be defective or non-compliant with applicable rules or regulations, we could be required to withdraw or recall it, which could result in adverse publicity and significant expenses. Although we maintain product liability and product recall insurance coverage, potential product liability or other product-related damages claims and/or withdrawal and recall costs may exceed the amount of insurance coverage or may be excluded under the terms of the policy. - **Litigation, arbitration or regulatory matters where the outcome is uncertain could entail significant expense.** From time to time, we are the subject of, or party to, various pending or threatened legal actions (including class actions), government investigations and proceedings, including, without limitation, those relating to, commercial transactions, product liability, consumer, employment, antitrust, environmental, health, safety and compliance-related matters. Such proceedings are subject to many uncertainties and the outcome of certain pending or threatened legal actions, investigations and proceedings may not be reasonably predictable and any related damages, injunctions and/or settlements may not be estimable. - **Environmental matters create potential liability risks.** We must comply with various environmental laws and regulations in the jurisdictions in which we operate, including those relating to the handling and disposal of solid and hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous substances. A release of such substances due to accident or an intentional act could result in substantial liability to governmental authorities or to third parties. We have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with environmental laws and regulations. - **We are subject to increasing focus and sensitivity by governmental, non-governmental organizations, customers, consumers and investors to sustainability issues, including those related to climate change.** As climate change, land use, water use, deforestation, recyclability or recoverability of packaging, plastic waste, ingredients and other ESG and sustainability concerns become more prevalent, federal, state and local governments, non-governmental organizations and our customers, consumers and investors are increasingly sensitive to these issues. This increased focus on sustainability may result in new laws, regulations and requirements that could cause disruptions in or increased costs associated with manufacturing our products. This could cause us to incur additional costs or to make changes to our operations to comply with any of the foregoing. We could also lose revenue if our consumers change brands or our customers move business from us because we have not complied with their ESG and sustainability requirements and environmentally-conscious investors may choose not to invest in our Common Stock if we do not comply with their business expectations. We have recognized that our customers and consumers are increasingly demanding transparency regarding our efforts to mitigate our impacts on climate change. For example, during 2020, some of our major customers requested we respond to various questionnaires, including the Climate Disclosure Project (“CDP”) Climate Change and Forests Questionnaires and use our responses and CDP grades to evaluate us. Efforts to meet these standards could impact our costs, and failure to meet our customers’ expectations could impact our sales. Certain of our business activities and the production of some of the materials used in our products and certain of our business activities, including petroleum based, agricultural and forest materials, and the growing global demand for livestock products which is a focus of our Animal and Food Production business, contribute to deforestation and climate change and reduction in biodiversity, and can adversely impact water quality and availability, people and communities. Climate change is, in turn, a threat to each of those activities. While we strive to minimize the environmental impact of our global operations, a potential loss in business could result from reduced demand for our products and loss of customers if we do not meet their expectations related to our efforts towards sustainability and fighting climate change. - **Current and future laws and regulations in the countries in which we and our suppliers operate could expose us to increased costs and other adverse consequences.** The development, manufacturing, processing, formulation (including stability), packaging, labeling, marketing, distribution and sale of our products are subject to regulation by federal agencies, including the FDA, the FTC, the EPA and the CPSC and foreign regulators and agencies. In addition, our and our suppliers’ operations are subject to the oversight of the Occupational Safety and Health Administration and the National Labor Relations Board. Our activities are also regulated by various agencies of the states, localities and foreign countries in which our products and their constituent materials and components are manufactured and sold. In particular, the FDA and foreign counterparts regulate the formulation, safety, development, manufacturing, packaging, labeling and distribution of condoms, home pregnancy and ovulation test kits, vaginal lubricants, electric and battery powered medical devices, over-the-counter pharmaceuticals and dietary supplements, including vitamins, minerals, and homeopathic products. The FDA also exercises oversight over cosmetic products such as depilatories. In addition, under a memorandum of understanding between the FDA and the FTC, the FTC has jurisdiction with regard to the promotion and advertising of these products, and the FTC regulates the promotion and advertising of our other products as well. As part of its regulatory authority, the FDA may periodically conduct inspections of the physical facilities, machinery, processes and procedures that we and our suppliers use to manufacture regulated products and may identify compliance issues that would require us and our suppliers to make certain changes in our manufacturing facilities and processes. The failure of a facility to be in compliance may lead to regulatory action against the products made in that facility, including seizure, injunction or recall, as well as to possible action against the owner of the facility/manufacturer. We may be required to make additional expenditures to address these issues or possibly stop selling certain products until the compliance issue has been remediated. Likewise, any future determination by the FDA or a similar foreign agency, or by us in reviewing our compliance with applicable rules and regulations, that our products or quality systems do not comply with applicable regulations could result in future compliance activities, including product withdrawals or recalls, import detentions, injunctions preventing the shipment of products, or other enforcement actions. For example, the FDA may determine that a particular claim that we use to support the marketing of a product is not substantiated, may not accept the evidence of safety for a new product that we may wish to market, may challenge the safety or effectiveness of existing products based on, among other things, changes in formulations, inadequate stability or “shelf-life,” consumer complaints, or improper labeling, and may determine that our dietary supplement business manufacturing, packaging, labeling and holding operations do not comply with cGMPs. Similarly, we may identify these or other issues in internal compliance reviews of our operations and the operations and products of vendors and acquired companies. These other issues may include the identification of contaminants or non-compliant levels of particular ingredients. Any of the foregoing could subject us to adverse publicity, force us to incur unanticipated costs and have a material adverse effect on our business, financial condition and results of operations. Additionally, delays in the acceptance, review and approval of products by the FDA, or other required governmental approvals, may result from government shutdowns due to the failure by Congress to enact regular appropriations. In 2019, our VITAFUSION brand launched CBD Full Spectrum Hemp Extract gummies, a new product line made with full spectrum hemp extract containing cannabidiol (“CBD”). Hemp was exempted from federal regulation as a controlled substance under the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”). The 2018 Farm Bill did not eliminate or affect regulation of hemp and its derivatives by the FDA, FTC, or state governments. We believe that our new product line complies with applicable FDA requirements, although the FDA takes the position that CBD products cannot be marketed as dietary supplements and that CBD cannot be added to food. To date, the FDA’s enforcement activity has focused primarily on CBD products that bear express or implied claims suggesting that the products are intended to treat, cure, prevent, or mitigate a disease. The FTC has similarly focused on disease claims. Our products do not bear disease claims. The FDA is considering whether to engage in rulemaking to permit the marketing of CBD products as dietary supplements. There has also been discussion of legislative changes. For example, HR 5587 was introduced in January 2020. HR5587 would amend the FDC Act to include hemp-derived CBD in the definition of a dietary supplement. Although state laws have been evolving in the wake of the 2018 Farm Bill, we do not intend to sell our products in states that continue to prohibit sales of certain hemp-based CBD products. In 2021, our Nair brand is launching one depilatory cosmetic product that contains broad spectrum hemp extract. FDA’s position that CBD products cannot be marketed as dietary supplements and that CBD cannot be added to food does not extend to cosmetic products. We do not intend to sell our Nair product in states that continue to prohibit sales of certain hemp-based CBD products. The FDA and certain states and local governments may enact regulations or change their enforcement priorities in a manner that further limits the marketing and use of CBD products. We do not know what the impact of such regulatory activities would be on our products, and what costs, requirements, and possible prohibitions may be associated with such regulatory activities. Our failure to comply with applicable regulatory requirements or FDA’s or any other state’s disagreeing with our interpretation of applicable FDA or state requirements could result in, among other things, administrative, civil, or criminal penalties or fines; product seizure, mandatory or voluntary product recalls; warning or untitled letters; cease and desist orders against operations that are not in compliance; closure of facilities or operations; the loss, revocation, or modification of any existing licenses, permits, registrations, or approvals; or the failure to obtain additional licenses, permits, registrations, or approvals in new jurisdictions where we intend to do business. These laws and regulations may change in the future and we may incur material costs in our efforts to comply with current or future laws and regulations or in any product recalls. We are subject to regulations regarding the transportation, storage or use of certain chemicals to protect the environment, as well as the Commission’s rules with respect to “conflict minerals.” The new administration and Congress in the United States may seek to pass more stringent regulations in these areas, or more aggressively enforce existing regulations. Recent trade policies, tariffs and government regulations affecting trade between the U.S. and other countries, have introduced greater uncertainty and volatility. In addition, any additional or renewed significant governmental actions pertaining to the COVID-19 pandemic, including lockdowns, quarantines or other restrictions on the ability of our employees to travel or perform necessary business functions or our ability to develop, manufacture, distribute, market or sell our products, or the ability of our suppliers, customers or third-party partners to effectively run their operations, may negatively impact our ability to manufacture, distribute, market and sell our products. We are not able to predict the nature of these changes or of such future laws, regulations, repeals or interpretations or to predict the effect additional or shifting governmental regulation, when and if it occurs, would have on our business in the future. Such developments could require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, expanded adverse event reporting or other new requirements. There is also an increased risk of fraud or corruption in certain foreign jurisdictions and related difficulties in maintaining effective internal controls. Additionally, we could be subject to future inquiries or investigations by governmental and other regulatory bodies, which may be delayed or disrupted due to any government furlough. We could also be adversely affected by violations, or allegations of violations, of the Foreign Corrupt Practices Act and similar international anti-bribery laws. The Foreign Corrupt Practices Act and similar international anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials or other third parties for the purpose of obtaining or retaining business. - **We are subject to increasingly stringent privacy and security regulation.** We collect, use and store personal data of our employees, customers and other third parties in the ordinary course of business, and we are required to comply with increasingly complex and changing data privacy and security laws and regulations, that apply to the collection, storage, use, transmission and protection of personal information and other consumer and employee data, including particularly the transfer of personal data between or among countries. Recent high-profile security breaches of the information systems of a number of government agencies and U.S. companies may result in increased regulations and new security laws. The new administration and Congress in the United States may seek to pass more stringent regulations in these areas, or more aggressively enforce existing regulations. Numerous local, municipal, state, federal and international law and regulations address privacy and security including the California Online Privacy Protection Act, the Personal information Protection and Electronic Documents Act, the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act, the Telephone Consumer Protection Act of 1991, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Section 5(c) of the Federal Trade Commission Act, and, effective as of January 1, 2020 the California Consumer Privacy Act (CCPA). These privacy and security laws and regulations change frequently, and new legislation continues to be introduced. In particular, the CCPA requires new disclosures to California consumers, gives California consumers new rights with respect to their data, and permits California consumers to opt-out of certain sales of personal information. The CCPA provides for fines of up to $7,500 per violation. In Europe, the European Union ("EU") has adopted strict data privacy regulations. Following the passage of the EU’s General Data Protection Regulation ((EU) 2016/679) (“GDPR”) and the Regulation on Privacy and Electronic Communications (the “ePrivacy Regulation”), data privacy and security compliance in the EU are increasingly complex and challenging. The GDPR in particular has broad extraterritorial effect and imposes a strict data protection compliance regime with significant penalties for non-compliance (up to 4% of worldwide annual turnover or €20 million, whichever is higher). It is also important to note that many countries are following the EU in producing a broad omnibus law in relation to privacy protection. For instance, Brazil has just published a GDPR-like law. In general, the GDPR and ePrivacy Regulation, CCPA, and other local privacy laws, could also require adaptation of our technologies or practices, increased costs and changes to operations to satisfy local privacy requirements and standards. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome under any such investigation or audit could subject us to fines, penalties or orders to cease, delay or modify collection, use or transfers of personal data. We could also face rights requests, complaints, claims, or litigation from those persons whose data we collect, use and store as well as government investigations and fines. Any of these events or other circumstances related to our collection, use and transfer of personal data could also lead to negative media attention, damage to our reputation in the market or otherwise adversely affect our business. - **Changes in tax laws and regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and operating results.** Our future effective tax rate could be affected by changes in tax laws and regulations or their interpretation, changes in the mix of earnings in countries with differing statutory tax rates, or changes in the valuation of deferred tax assets and liabilities. In addition, we evaluate our deferred income tax assets and record a valuation allowance if it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. If the actual amount of our future taxable income is less than the amount we are currently projecting with respect to specific tax jurisdictions, or if there is a change in the time period within which the deferred tax asset becomes deductible, we could be required to record a valuation allowance against our deferred tax assets. The recording of a valuation allowance would result in an increase in our effective tax rate and would have an adverse effect on our operating results. In addition, changes in statutory tax rates may change our deferred tax assets or liability balances, which would also impact our effective tax rate. The new presidential administration has introduced greater uncertainty with respect to tax policies in the United States and major developments in tax policy could impact our business. - **Resolutions of tax disputes may adversely affect our earnings and cash flow.** Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. We provide for uncertain tax positions with respect to tax positions that do not meet the recognition thresholds or measurement standards mandated by applicable accounting guidance. Fluctuations in federal, state, local and foreign taxes or changes to uncertain tax positions, including related interest and penalties, may impact our effective tax rate and our financial results. We are regularly under audit by tax authorities, and although we believe our tax estimates are reasonable, the final outcome of tax audits and related litigation could be materially different than that reflected in our historical income tax provisions and accruals. In addition, when particular tax matters arise, a number of years may elapse before such matters are audited and finally resolved. Favorable resolution of such matters could be recognized as a reduction to our effective tax rate in the year of resolution. Unfavorable resolution of any tax matter could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. - **Our amended and restated bylaws include an exclusive forum provision.** Our amended and restated bylaws include an “exclusive forum provision,” which may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers. If a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we could incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. ### Financial Risks - **We have substantial indebtedness and we may incur substantially more debt in the future.** As of December 31, 2020, we had approximately $2,164 million of total consolidated indebtedness, net of debt issuance costs. This amount of indebtedness could have important consequences, including: - making it more difficult for us to satisfy our cash obligations; - limiting our ability to fund potential acquisitions; - requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness, which would reduce the availability of cash flow to fund capital expenditures and other general corporate purposes; - limiting our flexibility in planning for, or reacting to, general adverse economic conditions or changes in our business and the industry in which we operate; - limiting our ability to repurchase our Common Stock; and - placing us at a competitive disadvantage compared to our competitors that have less debt. Additionally, our credit facility is subject to certain financial and other customary covenants. In the event of a breach of those covenants, our lenders under the credit facility may be entitled to accelerate the related debt (and any lenders in respect of any other debt to which a cross-default provision applies may be entitled to accelerate such other debt), and we could be required to seek amendments or waivers under the debt instruments or to refinance the debt. We may incur substantial additional indebtedness in the future to fund acquisitions, to repurchase shares or to fund other activities for general business purposes. If additional new debt is added to the current debt levels, the related risks that we now face could intensify. A substantial increase in our indebtedness could also have a negative impact on our credit ratings. In this regard, failure to maintain our credit ratings could adversely affect the interest rate available to us in future financings, as well as our liquidity, competitive position and access to capital markets. Any decision regarding future borrowings will be based on the facts and circumstances existing at the time, including market conditions and our credit ratings. LIBOR, the interest rate benchmark used as a reference rate on our variable rate debt, including our revolving credit facility, term loan, and interest rate swaps was expected to be fully phased out by the end of 2021, when private-sector banks are no longer required to report the information used to set the rate. However, in late 2020, ICE Benchmark Administration (“IBA”), the organization responsible for administering LIBOR, announced its intention to extend the publication of certain USD LIBOR tenors until June 30, 2023. While it appears that some measure of phase out will still occur by the end of 2021, IBA’s announcement creates uncertainty with respect to timing and implementation of a new reference rate. Given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate that may be established, there are additional uncertainties regarding a transition from LIBOR, including but not limited to the need to amend all contracts with LIBOR as the reference rate and how this will impact our cost of variable rate debt and certain derivative financial instruments. We will also need to consider new contracts and if they should reference an alternative benchmark rate or include suggested fallback language, as published by the Alternative Reference Rates Committee from time to time. - **Our business is exposed to domestic and foreign currency fluctuations.** We are exposed to foreign currency exchange rate risk (both transaction and translation) with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. Dollar. Outside of the U.S., sales and costs are denominated in a variety of currencies, including the Canadian Dollar, Euro, Pound, Mexican Peso and Australian Dollar, among others. A weakening of the currencies in which sales are generated relative to the currencies in which costs are denominated would decrease operating profits and cash flow. Changes in currency exchange rates may also affect the relative prices at which we purchase materials and services in foreign markets. Although we, from time to time, enter into forward exchange contracts to reduce the impact of foreign exchange rate fluctuations related to anticipated but not yet committed sales or purchases denominated in the U.S. Dollar, Canadian Dollar, Pound, Euro, Mexican Peso and Australian Dollar, foreign currency fluctuations could have a material adverse effect on our business, financial condition and results of operations. ### General Risks - **We must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of the COVID-19 pandemic.** Our business and financial results have been, and may continue to be, negatively impacted by the fear of exposure to or actual effects of the COVID-19 pandemic, such as, but not limited to: - negative impact on the global and U.S. domestic economy, significant unemployment, and market volatility; - reduced travel or recommendations or mandates from governmental authorities to avoid various sized gatherings, close facilities, suspend operations, or reduce hours, or to self-quarantine: - the impact of the CARES Act or other laws or regulations, employee-quarantines or similar other restrictions on our business operations or those of our customers; - significant increases in or reductions in demand or significant volatility in demand for one or more of our products, resulting in pressure on our operations and supply chain networks and the ability to meet such demand; - inability to meet our retailer orders and customers’ needs due to disruptions in our manufacturing and distribution network, supply chain, or capacity constraints or those of our finished goods, raw materials, or transportation suppliers; - continued shifts in consumer demand, including accelerated shifts to online shopping and increased competition in e-commerce in many of our categories from our larger legacy competitors and newer digitally native brands which have increasingly moved into consumer products and staples; - pricing pressures on our products as retailers face added costs to build their e-commerce capacity; - retailer fines related to our underperformance with respect to on time and in full shipments due to restrictions on our ability to produce and deliver products as a result of employee absenteeism or sickness, a tight trucking market or reduced shipping capacity, additional governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities or those of our suppliers; - closures or reduced hours by our customers; and - the impact of ongoing government orders and the need to protect our workforce. Despite our efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party or governmental actions taken to contain its spread and mitigate its public health effects. While the vast majority of our products are consumer staples that generally are less vulnerable to decreases in discretionary spending than other products, some of our products, particularly WATERPIK and some other personal care brands, are more discretionary in nature and, are more likely to be affected by consumer decisions to control spending and the impact and duration of recessionary economic conditions. In early 2021, vaccines for combatting COVID-19 were approved by health agencies in certain countries/regions in which we operate (including the U.S., United Kingdom, European Union, Canada and Mexico) and began to be administered. However, initial quantities of vaccines are limited and vaccine distributions, controlled by local authorities, are being allocated, generally first to front-line health care workers and other essential workers and next to those members of individual populations believed most susceptible to severe effects from COVID-19. Full administration of the COVID-19 vaccines is unlikely to occur in most jurisdictions until mid- to late- 2021. The impact of COVID-19, including the impact of restrictions imposed to combat its spread, could result in additional businesses being shut down, additional work restrictions and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be even more challenging to obtain and process raw materials to support our business needs, and more individuals could become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations. Further, as some of our customers’ businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of our business, financial condition or results of operations. The potential effects of COVID-19 also could impact many of the other risk factors described herein, but given the evolving health, economic, social and governmental environments, such potential impact remains uncertain. While we expect the impacts of COVID-19 to continue to have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time. - **Our operating results have been, and could be in the future, adversely affected by natural disasters, public health crises, political crises, or other catastrophic events, or unfavorable worldwide, regional and local economic and financial market conditions.** Our operations, as well as the operations of our third-party manufacturers, suppliers and customers, may be subject to disruption from a variety of causes, including a protracted economic downturn, material shortages, financial difficulties, work stoppages, cyberattacks, and other disruptions in information technology systems, demonstrations, political instability or uncertainty in the U.S. or abroad, disease outbreaks or pandemics (for example, an outbreak of a virus such as COVID-19), acts of war, terrorism, fire, earthquakes, flooding or other natural disasters, disruptions in logistics, loss or impairment of key manufacturing sites, supplier capacity constraints, raw material and product quality or safety issues, industrial accidents or other occupational health and safety issues. If a major disruption were to occur, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations. The global economy and the economies in regions in which we conduct business have experienced substantial economic downturns as a result of the COVID-19 pandemic. We are currently experiencing reduced demand for certain of our consumer products and may in the future be adversely affected in a material way by lower consumer demand as a result of recessionary economic conditions, including after the direct impact of the COVID-19 pandemic has subsided. In addition, ongoing political uncertainty in many countries, including the ongoing political transition in Hong Kong, the exit of the United Kingdom from the European Union, and the transition of presidential administrations in the United States have created additional economic uncertainty and volatility in the financial markets. - **We rely significantly on information technology. Any inadequacy, interruption, theft or loss of data, malicious attack, integration failure, failure to maintain the security, confidentiality or privacy of sensitive data residing on our systems or other security failure of that technology could harm our ability to effectively operate our business and damage the reputation of our brands.** We rely extensively on information technology systems, some of which are managed by third-party service providers, to conduct our business. These systems include, but are not limited to, programs and processes relating to internal communications and communications with other parties, ordering and managing materials from suppliers, converting materials to finished products, shipping product to customers, billing customers and receiving and applying payment, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, collecting and storing customer, consumer, employee, investor, and other stakeholder information and personal data, and other processes necessary to manage our business. We sell certain of our products directly to consumers online and through websites, mobile apps and connected devices, and we offer promotions, rebates, customer loyalty and other programs through which it may receive personal information, and we or our vendors could experience cyber-attacks, privacy breaches, data breaches or other incidents that may result in unauthorized access, disclosure and misuse of consumer, customer, employee, vendor or Company information. Increased information technology security threats and more sophisticated computer crime, including ransomware, denial of service and phishing attacks and advanced persistent threats, pose a potential risk to the security of our information technology systems, networks, and services, and those of our customers and other business partners, as well as the confidentiality, availability, and integrity of our data, and the data of our customers and other business partners. As a result, our information technology systems, networks or service providers could be damaged or cease to function properly or we could suffer a loss or disclosure of business, personal or stakeholder information, due to any number of causes, including catastrophic events, power outages and security breaches. Although we have business continuity plans in place and have implemented a breach response plan to address service interruptions, if these plans do not provide effective alternative processes on a timely basis, we may suffer interruptions in our ability to manage or conduct our operations which may adversely affect our business. In addition, if our service providers, suppliers or customers experience a breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in our supply chain or reduced customer orders or other business operations. Recently, there have been high profile security breaches of the information systems of a number of government agencies and U.S. companies, resulting in significant disruptions. Our information technology systems and, our third-party providers’ systems, have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyberattacks. Such attacks may originate from nation states or attempts by outside parties, hackers, criminal organizations or other threat actors. In addition, insider actors-malicious or otherwise-could cause technical disruptions and/or confidential data leakage. To date, we have seen no material impact on our business or operations from these attacks; however, we cannot guarantee that our security efforts will prevent attacks and resulting breaches or breakdowns of our, or our third-party service providers’ databases or systems. In addition, although we have policies and procedures in place governing the secure storage of personal information collected by us or our third-party service providers, data breaches due to human error or intentional or unintentional conduct may occur in the future. Although we are currently implementing enterprise-wide upgrades to our systems and will continue to monitor and upgrade systems as appropriate, legacy systems may be vulnerable to increased risk. Additionally, if a new system does not function properly, it could affect our ability to order supplies, process and deliver customer orders and process and receive payments for our products. This could adversely impact our results of operations and cash flows. Moreover, because the techniques, tools and tactics used in cyberattacks frequently change and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack. As such, we may need to expend additional resources and incur additional costs in the future to continue to protect against or address problems caused by any business interruptions or data security breaches. - **We may not be able to attract, retain and develop key personnel.** The labor market in the United States is very competitive. Our future performance depends in significant part upon the continued service of our executive officers and other key personnel, including at our plants. Competition for qualified plant personnel has been intense. The loss of the services of one or more executive officers or other key employees, including as a result of illness to themselves or their families due to the COVID-19 pandemic or otherwise, could have a material adverse effect on our business, prospects, financial condition and results of operations. This effect could be exacerbated if any officers or other key personnel left as a group or at the same time. Our success also depends, in part, on our continuing ability to attract, retain and develop highly qualified and diverse personnel. Competition for such personnel is intense, and there can be no assurance that we can retain our key employees or attract, assimilate and retain other highly qualified personnel in the future. Factors that may affect our ability to attract and retain sufficient numbers of key employees include employee morale, our reputation, competition from other employers and the availability of qualified personnel in a tightening labor market. - **Our continued growth and expansion, reliance on third-party service providers and implementation of new accounting standards could adversely affect our internal control over financial reporting.** Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with generally accepted accounting principles in the U.S. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Our continuing growth and expansion in domestic and globally dispersed markets, such as our acquisition of WATERPIK, FLAWLESS, PASSPORT, ZICAM and others, may place significant additional pressure on our system of internal control over financial reporting and require us to update our internal control over financial reporting to integrate such acquisitions. Moreover, we engage the services of third parties to assist with business operations and financial reporting processes, which injects additional monitoring obligations and risk into the system of internal control. When we are required to comply with new or revised accounting standards, we must make any appropriate changes to our internal control over financial reporting to fully implement the standards, which may require significant effort and judgment. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our results of operations accurately and on a timely basis, or to detect and prevent fraud and could expose us to regulatory enforcement action and stockholder claims. - **Our business could be negatively impacted as a result of stockholder activism, an unsolicited takeover proposal or a proxy contest or short sellers.** In recent years, proxy contests, unsolicited takeovers and other forms of stockholder activism have been directed against numerous companies in our industry, including us. If such a campaign or proposal were to be made against us, we would likely incur significant costs. Stockholder activists may also seek to involve themselves in the governance, strategic direction and operations of our business through stockholder proposals or otherwise disrupting our business and diverting the attention of our management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, the perception that we need a change in the direction of our business, or the perception that we are unstable or lack continuity, which may be exploited by our competitors, cause concern to our current or potential customers, and may make it more difficult for us to attract and retain qualified personnel and business partners. Actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. We may also be the target of short sellers who engage in negative publicity campaigns that may use selective information that may be presented out of context or that may misrepresent facts and circumstances. During 2019, we were the target of a negative publicity campaign by a short-seller, which negatively impacted our stock price. ## Properties As filed, 889 characters. We lease a corporate office building in Ewing, New Jersey for our global corporate headquarters. The lease expires in 2033 and includes two 10-year extension terms at our option. In addition, we own an office building in Fort Collins, Colorado and an office building in Princeton, New Jersey that is occupied by our research and development department. We own or lease manufacturing facilities, warehouses and other offices in 16 different U.S. states and 10 different countries outside of the U.S. Many of our domestic and international sites manufacture and distribute products for multiple segments of our business. We believe that our operating and administrative facilities are adequate and suitable for the conduct of our business. We also believe that our production facilities are suitable for current manufacturing requirements for our consumer and specialty products businesses. ## Legal proceedings As filed, 820 characters. ### General We, in the ordinary course of our business are the 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. ## Management's discussion and analysis As filed, 59,773 characters. Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements. OVERVIEW #### Our Business We develop, manufacture and market a broad range of consumer household and personal care and specialty products focused on animal and food production, chemicals and cleaners. We focus our consumer products marketing efforts principally on our 13 “power brands.” These well-recognized brand names include ARM & HAMMER, used in multiple product categories such as baking soda, cat litter, carpet deodorization and laundry detergent; TROJAN condoms, lubricants and vibrators; OXICLEAN stain removers, cleaning solutions, laundry detergent and bleach alternatives; SPINBRUSH battery-operated and manual toothbrushes; FIRST RESPONSE home pregnancy and ovulation test kits; NAIR depilatories; ORAJEL oral analgesic; XTRA laundry detergent; L’IL CRITTERS and VITAFUSION gummy dietary supplements; BATISTE dry shampoos; WATERPIK water flossers and replacement showerheads; FLAWLESS products; and ZICAM cold remedy products. We sell our consumer products under a variety of brands through a broad distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, dollar, pet and other specialty stores and websites and other e-commerce channels, all of which sell the products to consumers. We sell our specialty products to industrial customers, livestock producers and through distributors. We operate our business in three segments: Consumer Domestic, Consumer International and the Specialty Products Division (“SPD”). The segments are based on differences in the nature of products and organizational and ownership structures. In 2020, the Consumer Domestic, Consumer International and SPD segments represented approximately 77%, 17% and 6%, respectively, of our consolidated net sales. #### COVID-19 Pandemic The COVID-19 pandemic is positively impacting certain of our businesses, while negatively impacting the short-term results of certain others. We have continued to experience a significant increase in consumer demand for many of our products that began in March of 2020, including VITAFUSION and L’IL CRITTERS gummy vitamins, A&H Liquid laundry detergent, A&H baking soda, A&H cat litter and Kaboom bathroom cleaners. On the other hand, some other personal care brands have been negatively impacted by the temporary closures of certain non-essential retailers and the reduction of consumer foot traffic at retailers from which these brands derive a significant proportion of sales. Our WaterPik business had been negatively impacted by the temporary closure of dental offices across the United States in the first half of the year but had positive sales growth in the second half and full year as dental offices have re-opened. Looking forward, we may experience significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things, the temporary or prolonged inability of consumers to purchase our products due to illness, quarantine or other travel or gathering restrictions, store closures, unemployment or other financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-loading or unloading activity. Some products have also been impacted by a shift in consumer spending away from more discretionary products. While there is no certainty that current high levels of demand for certain of our products will continue, we have taken steps to increase short-term manufacturing capacity for our cleaning products (including laundry detergent, baking soda, and cleaners) and health care products (including vitamins and nasal hygiene) and are working closely with our suppliers, contract manufacturers and retail partners to ensure sustained supply to keep pace with increased demand. We will also make investments in the expansion of long-term in-house and third-party manufacturing capacity. Although we have seen increased demand in certain of our product categories, in the future, the COVID-19 pandemic may cause reduced demand for our products if it results in a recessionary global economic environment. The timing and impact of potential consumer pantry destocking in markets in which we serve may also have a negative impact on demand. Moreover, we continue to experience and anticipate increased online sales during the COVID-19 pandemic. The COVID-19 pandemic and the corresponding government response have led to increased unemployment and economic uncertainty, which could lead to a further reduction in consumer spending. In early 2021, vaccines for combatting COVID-19 were approved by health agencies in some countries in which we operate, including the U.S., U.K., European Union, Canada and Mexico. However, initial quantities of vaccines are limited and vaccine distributions, controlled by local authorities, are being allocated, generally first to front-line health care workers and other essential workers and next to those members of individual populations believed most susceptible to severe effects from COVID-19. Full administration of the COVID-19 vaccines is unlikely to occur in most jurisdictions until mid- to late- 2021. Economic conditions are, and we expect that they will continue to be, highly volatile and uncertain. Recessionary conditions could reduce demand for our discretionary products and put downward pressure on prices. Some of our retail customers have closed their stores or reduced store hours, which has impacted their ability to meet outstanding obligations and may cause further reductions in their purchases in the coming months. Substantially all of our products are considered by various governmental authorities to be essential for purposes of continuing our operations during the Covid-19 pandemic and our manufacturing and distribution facilities and those of our suppliers and contract manufacturers are open and continue to operate under applicable governmental requirements and guidance, including the Department of Homeland Security’s March 19, 2020 Guidance on the Essential Critical Infrastructure Workforce. We intend to continue to work with government authorities, implement our employee safety measures and supplement our in-house manufacturing with increased use of contract manufacturers to ensure that we are able to continue to manufacture and distribute our products during the COVID-19 pandemic. However, uncertainty resulting from the COVID-19 pandemic could result in an unforeseen disruption to our supply chain (for example a closure of a key manufacturing or distribution facility or the inability of a key supplier, contract manufacturer or transportation supplier to source and transport materials) that could impact our operations and ability to supply products to our customers. We are monitoring the impact that the COVID-19 pandemic and corresponding government action is having on our customers and consumer demand and how potentially it will impact future cash flows for the short and long term and its impact to intangible asset carrying values. While we expect that many of these effects will not be permanent, it is impossible to predict their duration. #### 2020 Financial Highlights Key 2020 financial results include: - 2020 net sales grew 12.3% over 2019, with gains in all three of our segments. The gains are primarily due to favorable volumes in all three segments, as well as favorable pricing/product mix in the Consumer Domestic and Consumer International segments, partially offset by unfavorable pricing/product mix in SPD. - Gross margin decreased 30 basis points to 45.2% in 2020 from 45.5% in 2019, primarily due to higher manufacturing costs, in part due to costs associated with the COVID-19 pandemic, higher tariffs, and the impact on margins from acquired businesses, partially offset by favorable volume price/product mix and the impact of productivity programs. - Operating margin increased 170 basis points to 21.0% in 2020 from 19.3% in 2019, reflecting lower selling, general and administrative expenses (including the impact of the Flawless business acquisition liability adjustment), partially offset by lower gross margin and higher marketing costs as a percentage of sales. - We reported diluted net earnings per share in 2020 of $3.12, an increase of approximately 27.9% from 2019 diluted net earnings per share of $2.44. - Cash provided by operations was $990.3 in 2020, an $125.8 increase from the prior year, due to 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) and an improvement in working capital. - We returned $537.3 in 2020 to our stockholders through dividends and share repurchases. #### Strategic Goals, Challenges and Initiatives Our ability to generate sales depends on consumer demand for our products and retail customers’ decisions to carry our products, which are, in part, affected by general economic conditions in our markets. While a vast majority of our products are consumer staples and less vulnerable to decreases in discretionary spending than other products, an increasing number of our products, particularly those from our recent acquisitions, are more durable in nature and are more likely to be affected by consumer decisions to control spending. Some customers have responded to economic conditions by increasing their private label offerings (primarily in the dietary supplements, diagnostic kits and oral analgesics categories), launching their own brands, and consolidating the product selections they offer to the top few leading brands in each category. In addition, an increasing portion of our product categories is being sold by club stores, dollar stores, mass merchandisers and internet-based retailers. These factors have placed downward pressure on our sales and gross margins. We expect a competitive marketplace in 2021 due to new product introductions by competitors. In this environment, we intend to continue to aggressively pursue several key strategic initiatives: maintain competitive marketing and trade spending, tightly control our cost structure, continue to develop and launch new and differentiated products, and pursue strategic acquisitions. We also intend to continue to grow our product sales globally and maintain an offering of premium and value brand products to appeal to a wide range of consumers. We derive a substantial percentage of our revenues from sales of liquid laundry detergent. The continued customer demand for these products are critical to our future success. As a result, any commercialization, delays or reduction of sales of these products, in the event that our diversification efforts discussed below are not successful, could have a material adverse effect on our business, financial condition and operating results and cash flows. In addition, condom usage has declined, as a result of a lower 18 to 24 year-old population, alternate birth control options, less fear of HIV, social distancing, decreased sexual activity, and increased competition, all of which have contributed to lower demand for our products in the condom category. We continue to evaluate and vigorously address these pressures through, among other things, new product introductions and increased marketing and trade spending. However, there is no assurance that the category will not decline in the future and that we will be able to offset any such decline. We are continuously focused on strengthening our key brands through the launch of innovative new products, which span various product categories, including premium and value household products supported by increased marketing and trade spending. There can be no assurance that these measures will be successful. In the domestic business, seven out of 13 “power brands” met or exceeded category growth for the full year 2020. Our global product portfolio consists of both premium (58% of total worldwide consumer revenue in 2020) and value (42% of total worldwide consumer revenue in 2020) brands, which we believe enables us to succeed in a range of economic environments. We intend to continue to develop a portfolio of appealing new products to build loyalty among cost-conscious consumers. Over the past two decades, we have diversified from an almost exclusively U.S. business to a global company with approximately 17% of sales derived from international countries in 2020. We have subsidiary operations in six countries (Canada, Mexico, U.K., France, Germany, and Australia) and sell to over 130 other countries. In 2020, we benefited from our expanded global footprint and expect to continue to focus on selectively expanding our global business. If we are unable to expand our business internationally at the rate that we expect, we may not realize the operational benefits that we anticipate. Although we believe ongoing international expansion represents a significant opportunity to grow our business, our increasing activity in global markets exposes us to additional complexity and uncertainty. Net sales generated outside of the U.S. are exposed to foreign currency exchange rate fluctuations as well as political uncertainty which could impact future operating results. Moreover, the current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty regarding the global economy. The impact of U.S. tariffs on certain products was a component of increased cost of sale during the year ended December 31, 2020. The implementation of more restrictive trade policies, such as higher tariffs or new barriers to entry, in countries in which we manufacture or sell large quantities of products and services could negatively impact our business, results of operations and financial condition. We also continue to focus on controlling our costs. Historically, we have been able to mitigate the effects of cost increases primarily by implementing cost reduction programs and, to a lesser extent, by passing along some of these cost increases to customers. We have also entered into set pricing and pre-buying arrangements with certain suppliers and hedge agreements for diesel fuel and other commodities. Should we be required to address cost increases by increasing the prices that our customers pay for our products, we cannot be certain they will be accepted. Additionally, maintaining tight controls on overhead costs has been a hallmark of ours and has enabled us to effectively navigate recent challenging economic conditions. The identification and integration of strategic acquisitions are an important component of our overall strategy and product category diversification. Acquisitions have added significantly to our sales and profits and product category diversification over the last decade. This is evidenced by our 2015 acquisition of certain assets of Varied Industries Corporation (the “Vi-cor Acquisition”), 2016 acquisitions of Spencer Forrest, Inc., the maker of TOPPIK (the “Toppik Acquisition”), and the ANUSOL and RECTINOL businesses from Johnson & Johnson (the “Anusol Acquisition”), 2017 acquisitions of VIVISCAL from Lifes2Good Holdings Limited (the “Viviscal Acquisition”), Agro BioSciences, Inc. (the “Agro Acquisition”), and WATERPIK from Pik Holdings, Inc. (the “Waterpik Acquisition”), 2018 acquisition of Passport Food Safety Solutions, Inc. (the “Passport Acquisition”), the 2019 acquisition of FLAWLESS; and the 2020 acquisition of ZICAM from Consumer Health Holdco LLC. However, the failure to effectively identify or integrate any acquisition or achieve expected synergies may cause us to incur material asset write-downs. We actively seek acquisitions that fit our guidelines, and our strong financial position provides us with flexibility to take advantage of acquisition opportunities. In addition, our ability to quickly integrate acquisitions and leverage existing infrastructure has enabled us to establish a strong track record in making accretive acquisitions. Since 2001, we have acquired 12 of our 13 “power brands”. We believe we are positioned to meet the ongoing challenges described above due to our strong financial condition, experience operating in challenging environments and continued focus on key strategic initiatives: maintaining competitive marketing and trade spending, managing our cost structure, continuing to develop and launch new and differentiated products, and pursuing strategic acquisitions. This focus, together with the strength of our portfolio of premium and value brands, has enabled us to succeed in a range of economic environments, and is expected to position us to continue to increase stockholder value over the long-term. Moreover, the generation of a significant amount of cash from operations, as a result of net income and effective working capital management, combined with an investment grade credit rating provides us with the financial flexibility to pursue acquisitions, drive new product development, make capital expenditures to support organic growth and gross margin improvements, return cash to stockholders through dividends and share buy backs, and reduce outstanding debt, positioning us to continue to create stockholder value. For information regarding risks and uncertainties that could materially adversely affect our business, results of operations and financial condition and cash flows, see “Risk Factors” in Item 1A of this Annual Report. ### Recent Developments ### Zicam Acquisition 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. We 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 additional amount is payable five years from the closing. Zicam’s annual sales for the year ended December 31, 2020 were approximately $107.0. The acquisition was financed by us with a combination of cash on hand and short-term borrowings. The ZICAM business is managed in the Consumer Domestic segment. ### Dividend Increase 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. ### Accelerated Share Repurchase Program 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 the 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 program. As a result of our stock repurchases in recent years, there remains $210.0 of share repurchase availability under the 2017 Share Repurchase Program as of December 31, 2020. ### PERL WEISS Transaction During the first quarter of 2020, we sold our PERL WEISS® toothpaste brand in Germany with a tradename net book value of $2.7 and corresponding goodwill of $1.3 for cash proceeds of $7.0. The $3.0 gain associated with this transaction was recorded as a reduction of selling, general & administrative (“SG&A”) expense in the Consumer International segment. ### CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. By their nature, these judgments are subject to uncertainty. They are based on our historical experience, our observation of trends in industry, information provided by our customers and information available from other outside sources, as appropriate. Our significant accounting policies and estimates are described below. #### Revenue Recognition and Promotional and Sales Return Reserves Virtually all of our revenue represents sales of finished goods inventory and is recognized when received or picked up by our customers. The reserves for consumer and trade promotion liabilities and sales returns are established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Promotional reserves are provided for sales incentives, such as coupons to consumers, and sales incentives provided to customers (such as slotting, cooperative advertising, incentive discounts based on volume of sales and other arrangements made directly with customers). All such costs are netted against sales. Slotting costs are recorded when the product is delivered to the customer. Cooperative advertising costs are recorded when the customer places the advertisement for our products. Discounts relating to price reduction arrangements and coupons are recorded when the related sale takes place. Costs associated with end-aisle or other in-store displays are recorded when product that is subject to the promotion is sold. We rely on historical experience and forecasted data to determine the required reserves. For example, we use historical experience to project coupon redemption rates to determine reserve requirements. Based on the total face value of Consumer Domestic coupons redeemed over the past several years, if the actual rate of redemptions were to deviate by 0.1% from the rate for which reserves are accrued in the financial statements, a difference of approximately $1.0 in the reserve required for coupons would result. With regard to other promotional reserves and sales returns, we use experience-based estimates, customer and sales organization inputs and historical trend analysis in arriving at the reserves required. If our estimates for promotional activities and sales returns reserves were to change by 10% the impact to promotional spending and sales return accruals would be approximately $9.6. While management believes that its promotional and sales returns reserves are reasonable and that appropriate judgments have been made, estimated amounts could differ materially from actual future obligations. #### Impairment of goodwill, trade names and other intangible assets Carrying values of goodwill and indefinite-lived trade names are reviewed periodically for possible impairment. Finite intangible assets are assessed when there are business triggering events. Our impairment analysis is based on a discounted cash flow approach that requires significant judgment with respect to unit volume, revenue and expense growth rates, and the selection of an appropriate discount rate. Management uses estimates based on expected trends in making these assumptions. With respect to goodwill, impairment occurs when the carrying value of the reporting unit exceeds the discounted present value of cash flows for that reporting unit. For trade names and other intangible assets, an impairment charge is recorded for the difference between the carrying value and the net present value of estimated future cash flows, which represents the estimated fair value of the asset. Judgment is required in assessing whether assets may have become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated technological change, distribution losses, or competitive activities and acts by governments and courts may indicate that an asset has become impaired. The result of our annual goodwill impairment test determined that the estimated fair value substantially exceeded the carrying values of all reporting units. In addition, there were no goodwill impairment charges for each of the years in the three-year period ended December 31, 2020. 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. We determined that the fair value of all 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. However, in recent years our TROJAN business, specifically the condom category, has not grown and competition has increased resulting in a reduction in expected future cash flows. As a result, the TROJAN business has experienced sales and profit declines that has eroded a significant portion of the excess between the fair and carrying value of the tradename, which could potentially result in an impairment. While management can and has implemented strategies to address the risk, significant changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that could trigger future impairment charges of these assets. It is possible that our conclusions regarding impairment or recoverability of goodwill or other intangible assets could change in future periods if, for example, (i) the businesses or brands do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies change from current assumptions, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA. A future impairment charge for goodwill or intangible assets could have a material effect on our consolidated financial position or results of operations. #### Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the differences are expected to be recovered or settled. Management provides a valuation allowance against deferred tax assets for amounts which are not considered “more likely than not” to be realized. We record liabilities for potential assessments in various tax jurisdictions under U.S. GAAP guidelines. The liabilities relate to tax return positions that, although supportable by us, may be challenged by the tax authorities and do not meet the minimum recognition threshold required under applicable accounting guidance for the related tax benefit to be recognized in the income statement. We adjust this liability as a result of changes in tax legislation, interpretations of laws by courts, rulings by tax authorities, changes in estimates and the expiration of the statute of limitations. Many of the judgments involved in adjusting the liability involve assumptions and estimates that are highly uncertain and subject to change. In this regard, settlement of any issue, or an adverse determination in litigation, with a taxing authority could require the use of cash and result in an increase in our annual tax rate. Conversely, favorable resolution of an issue with a taxing authority would be recognized as a reduction to our annual tax rate. #### New Accounting Pronouncements Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2020. ### RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 The discussion of results of operations at the consolidated level presented below is followed by a more detailed discussion of results of operations by segment. This section of this Form 10-K generally discusses 2020 and 2019 results and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019. The segment discussion also addresses certain product line information. Our operating segments are consistent with our reportable segments. ### Consolidated results ### 2020 compared to 2019 | | Twelve Months Ended December 31, 2020 | Change vs. Prior Year | Twelve Months Ended December 31, 2019 | | --- | ---: | ---: | ---: | | **Net Sales** | **$4,895.8** | 12.3% | $4,357.7 | | **Gross Profit** | **$2,214.2** | 11.6% | $1,984.0 | | Gross Margin | **45.2%** | -30 basis points | 45.5% | | **Marketing Expenses** | **$591.2** | 14.8% | $515.0 | | Percent of Net Sales | **12.1%** | +30 basis points | 11.8% | | **Selling, General & Administrative Expenses** | **$593.3** | -5.6% | $628.8 | | Percent of Net Sales | **12.1%** | -230 basis points | 14.4% | | **Income from Operations** | **$1,029.7** | 22.6% | $840.2 | | Operating Margin | **21.0%** | +170 basis points | 19.3% | | **Net income per share - Diluted** | **$3.12** | 27.9% | $2.44 | #### Net Sales Net sales for the year ended December 31, 2020 were $4,895.8, an increase of $538.1, or 12.3% compared to 2019 net sales. The components of the net sales increase are as follows: | Net Sales - Consolidated | December 31, 2020 | | --- | ---: | | Product volumes sold | 8.1% | | Pricing/Product mix | 1.5% | | Foreign exchange rate fluctuations / Other | (0.1%) | | Volume from acquired product lines (net of divestiture) (1) | 2.8% | | **Net Sales increase** | **12.3%** | (1) On December 1, 2020, we completed the Zicam Acquisition. On May 1, 2019, we completed the Flawless Acquisition. The results of these acquisitions are included in our results since the date of acquisition. During the second quarter of 2019, we sold our consumer business in Brazil. During the first quarter of 2020 we completed the sale of the PERL WEISS brand. The volume change reflects increased product sales in all three of our segments. Price/mix was favorable in the Consumer Domestic and Consumer International segments, but was partially offset by slightly unfavorable price/mix in the SPD segment. Our gross profit for 2020 was $2,214.2, a $230.2 increase compared to 2019. Gross margin was 45.2% in 2020 compared to 45.5% in 2019, a 30 basis points (“bps”) decrease. The decrease is due to higher manufacturing costs of 240 bps, primarily due to costs associated with the COVID-19 pandemic, higher costs of 50 bps as a result of incremental tariffs, and the impact on margins from acquired businesses of 30 bps, partially offset by favorable price/volume/mix of 150 bps (primarily due to a reduction in trade promotion and coupons to reduce retail depletion of inventories), and the impact of productivity programs of 140 bps. #### Operating Costs Marketing expenses for 2020 were $591.2, an increase of $76.2 compared to 2019. The higher marketing expenses is due to investments behind new product launches, consumer research and digital advertising. Marketing expenses as a percentage of net sales increased 30 bps to 12.1% in 2020 as compared to 2019 due to 160 bps on higher expenses partially offset by 130 bps of leverage on higher net sales. SG&A expenses for 2020 were $593.3, a decrease of $35.5 or 5.6% compared to 2019. The decrease is primarily due to the reduction of the Flawless business acquisition liability by $94.0, the reduction of expenses related to the 2019 charge associated with selling our consumer business in Brazil of $7.6, and the 2020 gain of $3.0 associated with the sale of PERL WEISS, partially offset by higher amortization expense related to the Flawless and Zicam Acquisitions, and higher incentive compensation, information system, R&D and selling costs. SG&A as a percentage of net sales decreased 230 bps to 12.1% in 2020 compared to 14.4% in 2019. The decrease is due to 160 bps of leverage associated with higher sales and 70 bps on lower expenses, including the impact of the Flawless business acquisition liability adjustment. #### Other Income and Expenses Other expense increased by $1.0 in 2020 as compared to 2019, primarily due to the effect of changes in foreign exchange rates. Interest expense in 2020 was $61.0, a decrease of $12.6. The decrease is primarily due to the repayment of the $300.0 2.45% Senior Notes that matured in the fourth quarter of 2019 and lower interest rates. #### Taxation The 2020 U.S. federal effective income tax rate was 19.3% compared to 20.4% in 2019. The decrease of 110 basis points was impacted by higher stock option exercises and a tax settlement in 2020. ### Segment results for 2020, 2019 and 2018 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 December 31, 2020, we held 50% ownership interests in each of Armand and ArmaKleen, respectively. Our equity in earnings of Armand and ArmaKleen, totaling $6.7, $6.6 and $9.2 for the three years ended December 31, 2020, 2019 and 2018, respectively, are included in the Corporate segment. Some of the 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 each of the three years ended December 31, 2020, 2019 and 2018 were as follows: | Net Sales(1) | Consumer Domestic | Consumer International | SPD | Corporate(3) | Total | | --- | ---: | ---: | ---: | ---: | ---: | | **2020** | **$3,767.6** | **$828.2** | **$300.0** | **$0.0** | **$4,895.8** | | 2019 | 3,302.6 | 756.3 | 298.8 | 0.0 | 4,357.7 | | 2018 | 3,129.9 | 709.5 | 306.5 | 0.0 | 4,145.9 | | **Income before Income Taxes(2)** | | | | | | | **2020(4)** | **$832.4** | **$105.0** | **$29.7** | **$6.7** | **$973.8** | | 2019(5) | 645.8 | 74.0 | 47.3 | 6.6 | 773.7 | | 2018(6) | 577.2 | 81.5 | 51.6 | 9.2 | 719.5 | (1) Intersegment sales from Consumer International to Consumer Domestic, which are not reflected in the table, were $11.7, $10.5 and $5.7 for the years ended December 31, 2020, 2019 and 2018, 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 in 2020, 2019 and 2018. (4) 2020 results include a $94.0 reduction of SG&A expenses to adjust the Flawless business acquisition liability, of which $79.9 was recorded to Consumer Domestic and $14.1 was recorded to Consumer International. During 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. (5) 2019 results include an SG&A charge associated with selling our consumer business in Brazil of $7.6 recorded in Consumer International and a $10.0 SG&A charge to adjust the Flawless business acquisition liability, of which $8.5 was recorded to Consumer Domestic and $1.5 was recorded to Consumer International. These charges were partially offset by a $7.3 adjustment to the Passport business acquisition liability and a $1.5 adjustment to the Agro business acquisition liability, both of which reduced SG&A expenses in SPD. (6) 2018 results include a $7.5 reduction of SG&A expenses to adjust the Agro business acquisition liability in SPD. Product line revenues for external customers for the years ended December 31, 2020, 2019 and 2018 were as follows: | | 2020 | 2019 | 2018 | | --- | ---: | ---: | ---: | | Household Products | **$2,038.5** | $1,821.7 | $1,725.5 | | Personal Care Products | **1,729.1** | 1,480.9 | 1,404.4 | | Total Consumer Domestic | **3,767.6** | 3,302.6 | 3,129.9 | | Total Consumer International | **828.2** | 756.3 | 709.5 | | Total SPD | **300.0** | 298.8 | 306.5 | | **Total Consolidated Net Sales** | **$4,895.8** | $4,357.7 | $4,145.9 | Household Products include deodorizing, cleaning and laundry products. Personal Care Products include condoms, pregnancy kits, oral care products, skin care products, hair care products and gummy dietary supplements. ### Consumer Domestic #### 2020 compared to 2019 Consumer Domestic net sales in 2020 were $3,767.6, an increase of $465.0 or 14.1% compared to net sales of $3,302.6 in 2019. The components of the net sales change are the following: | Net Sales - Consumer Domestic | December 31, 2020 | | --- | ---: | | Product volumes sold | 8.9% | | Pricing/Product mix | 1.8% | | Acquired product lines (1) | 3.4% | | **Net Sales increase** | **14.1%** | (1) Includes the Flawless and Zicam Acquisitions since the date of acquisition. The increase in net sales for 2020 reflects the impact of the Flawless and Zicam Acquisitions, higher sales of VITAFUSION and L’IL CRITTERS gummy vitamins, ARM & HAMMER liquid laundry detergent, OXICLEAN® stain fighters, ARM & HAMMER clumping cat litter and baking soda, WATERPIK water flossers and showerheads, KABOOM bathroom cleaners, and ARM & HAMMER laundry detergent scent boosters. A number of these brands realized higher than anticipated sales due to higher consumer demand due to the COVID-19 pandemic. Condom usage has declined, as a result of a lower 18 to 24 year-old population, alternate birth control options, less fear of HIV, decreased sexual activity, and increased competition, all of which have contributed to lower demand for our products in the condom category. Due primarily to the recent social distancing requirements related to the COVID-19 pandemic, condom usage continues to decline. As a result, the TROJAN business has experienced sales and profit declines that has eroded a portion of the excess between the fair and carrying value of the tradename, which could potentially result in an impairment. The carrying value of the TROJAN tradename is $176.4 and fair value exceeded carrying value by 53% as of December 31, 2020. This indefinite-lived intangible asset is susceptible to impairment risk. 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. This could result in a decline in fair value that could trigger a future impairment charge of the tradename. Consumer Domestic income before income taxes for 2020 was $832.4, a $186.6 increase as compared to 2019. The increase is due primarily to higher volumes of $206.6, favorable price/mix of $60.1, lower SG&A expenses of $14.4 (driven by the Flawless business acquisition liability adjustment of $79.9 in 2020), and lower interest and other expenses of $9.8, partially offset by higher marketing expenses of $62.7, and unfavorable manufacturing and distribution expenses of $40.9. ### Consumer International #### 2020 compared to 2019 Consumer International net sales in 2020 were $828.2, an increase of $71.9 or 9.5% as compared to 2019. The components of the net sales change are the following: | Net Sales - Consumer International | December 31, 2020 | | --- | ---: | | Product volumes sold | 7.7% | | Pricing/Product mix | 0.9% | | Foreign exchange rate fluctuations | (0.7%) | | Volume from acquired product lines (net of divestiture) (1) | 1.6% | | **Net Sales increase** | **9.5%** | (1) Includes the Flawless Acquisition since the date of acquisition. During the second quarter of 2019, we sold our consumer business in Brazil. During the first quarter of 2020 we completed the sale of the PERL WEISS brand. Excluding the impact of foreign exchange rates and the Flawless Acquisition, higher sales were driven primarily by the Global Markets Group, as well as Canada and Australia domestic markets, partially offset by declines in Mexico and UK. A number of brands in these regions realized higher than anticipated sales due to higher consumer demand resulting from the COVID-19 pandemic. Consumer International income before income taxes was $105.0 in 2020, an increase of $31.0 compared to 2019 due primarily to higher sales volumes of $38.9, lower SG&A costs of $22.7 (driven by the Flawless business acquisition liability adjustment of $14.1 in 2020), and lower interest expense of $0.4, partially offset by higher marketing expenses of $13.4, unfavorable manufacturing and commodity costs of $6.5, unfavorable price/product mix of $6.3, unfavorable foreign exchange rates of $3.6, and higher other expenses of $1.0. ### Specialty Products #### 2020 compared to 2019 SPD net sales were $300.0 for 2020, an increase of $1.2, or 0.4% compared to 2019. The components of the net sales change are the following: | Net Sales - SPD | December 31, 2020 | | --- | ---: | | Product volumes sold | 0.8% | | Pricing/Product mix | (0.4%) | | **Net Sales increase** | **0.4%** | Higher volumes in the non-dairy segment of the Animal and Food Production business were partially offset by lower volumes in the dairy segment, while the Specialty Chemicals business had flat volumes. Lower pricing primarily due to product mix in the non-dairy segment and the Specialty Chemicals business was partially offset by higher pricing in the dairy segment. Overall demand for these segments were impacted by factors relating to the COVID-19 pandemic. SPD income before income taxes was $29.7 in 2020, a decrease of $17.6 compared to 2019. The decrease in income before income taxes for 2020 is due primarily to higher SG&A costs of $13.6, unfavorable manufacturing costs of $8.6, and unfavorable price/product mix of $1.3, partially offset by higher sales volumes of $3.2, lower expenses of $2.9 including $0.4 of lower marketing expenses. ### Corporate The Corporate segment reflects the reclassification of administrative costs of the production, planning and logistics functions which are included in SG&A expenses in the operating segments but are elements of cost of sales in our Consolidated Statements of Income. Such amounts were $59.8, $48.2 and $44.0 for 2020, 2019 and 2018, respectively. Also included in corporate segment are the equity in earnings of affiliates from Armand and ArmaKleen, totaling $6.7, $6.6 and $9.2 for the three years ended December 31, 2020, 2019 and 2018, respectively. ### 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. In March 2020, we borrowed $825.0 under the Revolving Credit Facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. The full $825.0 was repaid in May 2020. We have the ability to borrow under the Revolving Credit Facility at any time up to the borrowing limit. As of December 31, 2020, we had $183.1 in cash and cash equivalents, and approximately $648.0 available through the revolving facility under our Credit Agreement 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. On May 1, 2019, we entered into a $300.0 unsecured term loan credit facility with various banks, the proceeds of which were used to partially fund the Flawless Acquisition. Unless prepaid, the loan is due on May 1, 2022. The interest rate is U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable margin based on our credit rating, which can range from 60 bps to 113 bps. We financed the Waterpik Acquisition with a portion of the proceeds from an underwritten public offering of $1,425.0 aggregate principal amount of Senior Notes completed on July 25, 2017, consisting of $300.0 aggregate principal amount of Floating Rate Senior Notes that were due in 2019 and have been fully repaid, $300.0 aggregate principal amount of 2.45% Senior Notes due 2022, $425.0 aggregate principal amount of 3.15% Senior Notes due 2027 and $400.0 aggregate principal amount of 3.95% Senior Notes due 2047 (collectively, the “Senior Notes”). The Floating Rate Senior Notes, which matured and were repaid in full with cash on hand and commercial paper on January 25, 2019, bore interest at a rate, reset quarterly, equal to three-month LIBOR plus 0.15%. On December 9, 2014, we issued $300.0 aggregate principal amount of 2.45% Senior Notes due December 15, 2019 (the “2019 Notes”). These Notes were repaid in full in the fourth quarter of 2019 with cash on hand and proceeds from the issuance of commercial paper. On September 26, 2012, we issued $400.0 aggregate principal amount of 2.875% Senior Notes due 2022 (the “2022 Notes”). The 2022 Notes were issued under the second supplemental indenture, dated September 26, 2012 (the “BNY Mellon Second Supplemental Indenture”) to the indenture dated December 15, 2010 (the “BNY Mellon Base Indenture”) between us and The Bank of New York Mellon Trust Company, N.A., as trustee. These Notes will mature on October 1, 2022, unless earlier retired or redeemed pursuant to the terms of the BNY Mellon Second Supplemental Indenture. In 2015, we initiated a Supply Chain Finance program (“SCF Program”). Under the SCF Program, qualifying suppliers may elect to sell their receivables from us for early payment. Participating suppliers negotiate their receivables sales arrangements directly with a third party. We are not party to those agreements and do not have an economic interest in the supplier’s decision to sell their receivables. The SCF Program may allow suppliers more favorable terms than they could secure on their own. The terms of our payment obligations are not impacted by a supplier’s participation in the SCF Program. Our payment terms with suppliers are consistent between suppliers that elect to participate in the SCF Program and those that do not participate. As a result, the program does not have an impact to our average days outstanding. All amounts outstanding to suppliers participating in the SCF Program are recorded within Accounts Payable in our Consolidated Balance Sheets, and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows. The current economic environment presents risks that could have adverse consequences for our liquidity. See the discussion of this and other risks under “Risk Factors” in Item 1A of this Annual Report. Although there is uncertainty related to the impact of the COVID-19 pandemic 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. 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. On November 1, 2017, the Board authorized a share repurchase program, under which we 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 date. We also continued 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. In November of 2017, we executed open market purchases of $100.0 of our Common Stock under the 2017 Share Repurchase Program. In the first quarter of 2018, we settled an accelerated share repurchase (“ASR”) contract and purchased approximately 4.1 million shares of Common Stock for $200.0, of which approximately $110.0 was purchased under the evergreen share repurchase program and $90.0 was purchased under the 2017 Share Repurchase Program. In January 2019, we executed open market purchases of $100.0 of our Common Stock, all of which were purchased under the evergreen share repurchase program. In September 2019, we executed open market purchases of $150.0 of our Common Stock of which $50.0 was purchased under the evergreen share repurchase program and $100.0 was purchased under the 2017 Share Repurchase Program. 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 program. As a result of these Common Stock repurchases, there remains $210.0 of share repurchase availability under the 2017 Share Repurchase Program as of December 31, 2020. 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 $180 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 | | Year Ended December 31, 2020 | December 31, 2019 | December 31, 2018 | | --- | ---: | ---: | ---: | | Net cash provided by operating activities | **$990.3** | $864.5 | $763.6 | | Net cash used in investing activities | **$(608.1)** | $(553.5) | $(112.1) | | Net cash used in financing activities | **$(360.1)** | $(472.9) | $(609.0) | #### 2020 compared to 2019 **Net Cash Provided by Operating Activities –** Our primary source of liquidity is our cash flow provided by operating activities, which is dependent on the level of net income and changes in working capital. Our net cash provided by operating activities in 2020 increased by $125.8 to $990.3 as compared to $864.5 in 2019 due to 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) and an improvement in working capital. The change in working capital is primarily due to higher accounts payable and accrued expenses, which in part is due to higher inventories to support sales growth. We measure working capital effectiveness based on our cash conversion cycle. The following table presents our cash conversion cycle information for the quarters ended December 31, 2020 and 2019: | | As of December 31, 2020 | December 31, 2019 | Change | | --- | ---: | ---: | ---: | | Days of sales outstanding in accounts receivable ("DSO") | 28 | 29 | (1) | | Days of inventory outstanding ("DIO") | 62 | 61 | 1 | | Days of accounts payable outstanding ("DPO") | 72 | 69 | (3) | | Cash conversion cycle | 18 | 21 | (3) | Our cash conversion cycle (defined as the sum of DSO plus DIO less DPO) at December 31, 2020, which is calculated using a two period average method, decreased 3 days from the prior year amount of 21 days to 18 days at December 31, 2020 due primarily to an increase in DPO of 3 days due to payable term extensions and payables related to higher inventory purchases. We continue to focus on reducing our working capital requirements. **Net Cash Used in Investing Activities –** Net cash used in investing activities during 2020 was $608.1, primarily reflecting $512.7 for the Zicam Acquisition, $98.9 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 investing activities during 2019 was $553.5, primarily reflecting $475.0 for the Flawless Acquisition, and $73.7 for property, plant and equipment additions. **Net Cash Used in Financing Activities –** Net cash used in financing activities during the twelve months of 2020 was $360.1, reflecting $300.0 of repurchases of our Common Stock, $237.3 of cash dividend payments, and $14.5 for the Agro business acquisition liability settlement, partially offset by $99.0 of short-term debt borrowings, net of repayments, and $93.0 of proceeds from stock option exercises. Net cash used in financing activities during the twelve months of 2019 was $472.9, reflecting $250.0 of repurchases of our common stock, $224.1 of cash dividend payments, and $49.0 of net debt repayments, partially offset by $52.8 of proceeds from stock option exercises. ### Commitments as of December 31, 2020 The table below summarizes our material contractual obligations and commitments as of December 31, 2020. | Short & Long-Term Debt | Payments Due by Period Total | 2021 | 2022 to 2023 | 2024 to 2025 | After 2025 | | --- | ---: | ---: | ---: | ---: | ---: | | Term loan due 2022 | $300.0 | $0.0 | $300.0 | $0.0 | $0.0 | | 2.45% Senior Notes due 2022 | 300.0 | 0.0 | 300.0 | 0.0 | 0.0 | | 2.875% Senior Notes due 2022 | 400.0 | 0.0 | 400.0 | 0.0 | 0.0 | | 3.15% Senior Notes due 2027 | 425.0 | 0.0 | 0.0 | 0.0 | 425.0 | | 3.95% Senior Notes due 2047 | 400.0 | 0.0 | 0.0 | 0.0 | 400.0 | | Debt obligations of foreign subsidiaries | 2.4 | 2.4 | 0.0 | 0.0 | 0.0 | | | **1,827.4** | **2.4** | **1,000.0** | **0.0** | **825.0** | | **Interest on Fixed Rate Debt(1)** | 539.9 | 48.0 | 71.3 | 58.4 | 362.2 | | **Lease Obligations** | 240.3 | 32.2 | 55.8 | 45.7 | 106.6 | | **Other Long-Term Liabilities** | | | | | | | Letters of Credit(2) | 3.1 | 3.1 | 0.0 | 0.0 | 0.0 | | Purchase Obligations(3) | 291.3 | 205.8 | 75.4 | 10.1 | 0.0 | | Other(4) | 9.1 | 4.5 | 4.6 | 0.0 | 0.0 | | **Total** | **$2,911.1** | **$296.0** | **$1,207.1** | **$114.2** | **$1,293.8** | (1) Represents interest on our 2.45% Senior Notes due in 2022, 2.875% Senior Notes due in 2022, 3.15% Senior Notes due 2027 and 3.95% Senior Notes due 2047. (2) Letters of credit with several banks guarantee payment for items such as insurance claims in the event of our insolvency. (3) We have outstanding purchase obligations with suppliers at the end of 2020 for raw, packaging and other materials and services in the normal course of business. These purchase obligation amounts represent only those items which are based on agreements that are enforceable and legally binding, and do not represent total anticipated purchases. (4) Other includes payments for baseball marketing and sponsorship. ### Off-Balance Sheet Arrangements We do not have off-balance sheet financing or unconsolidated special purpose entities. ### OTHER ITEMS ### Market risk #### Concentration of Risk A group of three customers accounted for approximately 36% of consolidated net sales each year in 2020, 2019 and 2018, respectively, of which a single customer, Walmart, accounted for approximately 23%, 24% and 23% in 2020, 2019 and 2018, respectively. #### Interest Rate Risk We had outstanding total debt at December 31, 2020, of $2,163.9, net of debt issuance costs, of which 70% has a fixed weighted average interest rate of 3.1% and the remaining 30% was constituted of commercial paper issued by us that currently has a weighted average interest rate of approximately 0.26% and the Term loan due 2022 with a current rate of approximately 0.88%. In 2019, we entered into interest rate swap lock agreements to hedge the risk of changes in the interest payments attributable to changes in the benchmark LIBOR interest rate associated with anticipated issuances of debt. The notional amount of the interest rate swap locks is $300.0. These interest rate swap lock agreements have been designated as hedges of the changes in fair value of the underlying debt obligation attributable to changes in interest rates and are accounted for as fair value hedges. #### Other Market Risks We are also subject to market risks relating to our diesel and other commodity costs, fluctuations in foreign currency exchange rates, and changes in the market price of the Common Stock. Refer to Note 3 to the Consolidated Financial Statements for a discussion of these market risks and the derivatives used to manage the risks associated with changing diesel fuel and other commodity prices, foreign exchange rates and the price of our Common Stock. ## Market risk As filed, 151 characters. This information appears under the heading “Market Risk” in the “Management’s Discussion and Analysis” section. Refer to page 44 of this Annual Report. ## Controls and procedures As filed, 1,944 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 Annual 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 Annual Report are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act are (i) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, 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) Management’s Report on Internal Control Over Financial Reporting The Company’s management’s report on internal control over financial reporting is set forth in Item 8 of this Annual Report and is incorporated by reference herein. The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting, which is set forth in Item 8 of this Annual Report. c) Change in Internal Control over Financial Reporting No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Filed Feb 18, 2021. Source: SEC EDGAR, the filing index for accession 0001564590-21-006669. Last ingested by Listed: Nov 13, 2026, 16:10 ET. No prices; not investment advice.