# CHURCH & DWIGHT CO INC /DE/ (CHD) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CHURCH & DWIGHT CO INC /DE/'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/313927/000095017025019801/chd-20241231.htm
Accession: 0000950170-25-019801
Filing date: 2025-02-13
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/CHD/
All MD&A years: /company/CHD/mda/
Previous year: /company/CHD/mda/fy2023/ (FY 2023)
Next year: /company/CHD/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, personal care and specialty products. Our well-recognized brands include ARM & HAMMER® baking soda, cat litter, laundry detergent, carpet deodorizer and other baking soda-based products; OXICLEAN® stain removers, cleaning solutions, laundry detergents and bleach alternatives; VITAFUSION® and L’IL CRITTERS® gummy dietary supplements for adults and children, respectively; BATISTE® dry shampoo; WATERPIK® water flossers and showerheads; THERABREATH® oral care products; HERO® acne treatment products; TROJAN condoms, lubricants and vibrators; SPINBRUSH battery-operated toothbrushes; FIRST RESPONSE home pregnancy and ovulation test kits; NAIR depilatories; ORAJEL oral analgesic; XTRA laundry detergent; and ZICAM cold shortening and relief products. Seven of those brands are designated as "power brands" because they compete in large categories, and we believe they have the potential for significant global expansion. Those seven brands are ARM & HAMMER®; OXICLEAN®; VITAFUSION® and L’IL CRITTERS®; BATISTE®; WATERPIK®; THERABREATH®; and HERO® and represent approximately 70% of our net sales and profits.

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 and commercial 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 sold and management organizational structures. In 2024, the Consumer Domestic, Consumer International and SPD segments represented approximately 77%, 18% and 5%, respectively, of our consolidated net sales.

Recent Developments

Pillar Two Tax Laws

In October 2021, members of the Organisation for Economic Co-operation and Development (“OECD”) agreed to a global minimum tax rate of 15%. In December 2021, OECD published its model rules on the agreed minimum tax known as the Global Anti-Base Erosion (“GloBE”) or Pillar Two rules. The Pillar Two rules are designed to be implemented into the domestic law of each jurisdiction to ensure large multinational enterprise groups are subject to a minimum effective tax rate of 15% in each jurisdiction where they operate. In December 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive. January 1, 2024 marked the official effective date of the 15% global corporate minimum tax imposed by the EU's Pillar Two Directive. We are monitoring developments and evaluating the impacts of the Pillar Two rules on our tax rate. Based on current legislation and available guidance, we do not anticipate a material impact to the Company.

Sale of MEGALAC supplement portfolio

During the first quarter of 2024, we exited the MEGALAC supplement portion of our Animal Nutrition business within our SPD segment. Net sales for the years ended December 31, 2024 and 2023 were $7.6 and $38.1, respectively.

Graphico Acquisition

On June 3, 2024, we acquired substantially all of the issued and outstanding shares of capital stock of Graphico, Inc. ("Graphico"), a Japan-based distributor focused on consumer goods primarily in the Japanese market (the “Graphico Acquisition”). We paid $19.9, net of cash acquired, at closing. We acquired the remaining minority shares for approximately $2.0 in July 2024. The Graphico Acquisition was financed with cash on hand, is expected to contribute to greater expansion of our business in the Asia-Pacific (APAC) region, and is managed in the Consumer International segment.

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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Sale of Passport Food Safety Business

During the second quarter of 2024, we sold our Passport food safety business, Passport Food Safety Solutions, Inc., with assets of $7.0, inclusive of intangible assets of $2.7 and corresponding goodwill of $1.0, for cash proceeds of $6.6 and $0.5 held in escrow for a gain of $0.1. Net sales for the years ended December 31, 2024 and 2023 were $6.4 and $13.0, respectively.

Favorable Tariff Ruling

During the second quarter of 2024, we received a favorable tariff ruling from the U.S. government associated with certain products imported from China, which resulted in $40.1 of cash refunds (pre tax) in the year ended December 31, 2024. The refunds resulted in a $31.6 reduction of Cost of goods sold and an increase in Interest income of $4.8 in the year ended December 31, 2024.

Vitamin Business Intangible Impairment

During the third quarter of 2024, the Company continued to experience a decline in market share and a deterioration in the financial performance for its Vitamins, Minerals and Supplements ("VMS") business, which includes the VITAFUSION and L'IL CRITTERS trade name, primarily due to significant product competition coming from new category entrants, including private label. The continued decline in profitability caused management to reassess its long-term strategy and financial outlook of the business. The revised financial outlook reflects lower estimates of future sales growth and cash flows which resulted in a triggering event in the third quarter. The triggering event required the Company to review the carrying value of assets supporting the business resulting in impairment charges of $357.1 in the year ended December 31, 2024.

Sale of 50% Ownership in Joint Venture

The Company’s 50% interest in The ArmaKleen Company was sold to our joint venture partner in October of 2024. The transaction is not material to the Company’s results of operations or cash flows.

Dividend Increase

On January 29, 2025, the Board declared a 4% increase in the regular quarterly dividend from $0.28375 to $ 0.295 per share (equivalent to an annual dividend of $1.18 per share) payable to stockholders of record as of February 14, 2025. The increase raises the annualized dividend payout from $277.0 to approximately $287.0 on an annualized basis.

2024 Financial Highlights

Key 2024 financial results include:

•
Net sales for the year ended December 31, 2024 grew 4.1% over 2023, with gains in Consumer Domestic and Consumer International, partially offset by lower sales in SPD. The gains are primarily due to favorable volumes, and pricing/product mix across all three segments, including the benefit of recent acquisitions in Consumer Domestic and Consumer International, partially offset by the exit of product lines in SPD and unfavorable foreign currency exchange rates in Consumer International.

•
Gross margin increased 160 basis points to 45.7% in 2024 from 44.1% in 2023, which includes an approximate 50 basis point benefit from a favorable tariff ruling. Excluding the tariff ruling gross margin increased due to the positive impact of productivity programs, favorable price/volume/mix, and business acquisition benefits, offset by higher manufacturing costs including labor and higher commodities.

•
Operating margin decreased 470 basis points to 13.3% in 2024 from 18.0% in 2023. The 2024 operating margin includes a non-cash charge of $357.1 or 580 basis points related to the impairment of the VITAFUSION and L'IL CRITTERS indefinite-lived trade name as well as a definite-lived customer relationship intangible asset and PP&E specific to the VMS business. Excluding the impairment charge, operating margin increased 110 basis points due to favorable gross margins, slightly offset by higher marketing expenses.

•
We reported diluted net earnings per share in 2024 of $2.37, a decrease of approximately 22.3% from 2023 diluted net earnings per share of $3.05. Earnings per share in 2024 includes the non-cash VMS trade name and other asset impairment charges of $1.10 per share. Excluding the impairment charges, 2024 diluted net earnings per share was $3.47 compared to 2023 diluted earnings per share of $3.05.

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(Dollars in millions, except share and per share data)

•
Cash provided by operations was $1,156.2 in 2024, a $125.6 increase from the prior year primarily due to an increase in cash earnings (net income adjusted for non-cash items).

•
We returned $277.0 in 2024 to our stockholders through cash dividends paid.

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, certain of our products, are more likely to be affected by consumer decisions to control spending. Some retail customers have responded to economic conditions by increasing their private label offerings (primarily in the dietary supplements, stain fighters, 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 are 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 intend to continue to aggressively pursue several key strategic initiatives: maintain competitive marketing and trade spending, tightly control our cost structure, expand our online market share by continuing to invest in e-commerce (global on-line sales were 21.4% of consumer sales in 2024), expand our presence and product offerings to consumers outside of the United States, continue to develop and launch new and differentiated products, pursue strategic acquisitions, 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. Our global product portfolio consists of both premium (64% of total worldwide consumer revenue in 2024) and value (36% of total worldwide consumer revenue in 2024) 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. We derive a substantial percentage of our revenues from sales of liquid laundry detergent. We continue to evaluate and vigorously address pressures on this business through, among other things, new product introductions and increased marketing and trade spending.

Over the past two decades, we have diversified from an almost exclusively U.S. business to a global company with approximately 18% of sales derived from countries outside of the United States in 2024, and we believe ongoing international expansion represents a significant opportunity to grow our business. We have subsidiary operations in eight countries (Canada, Mexico, U.K., France, Germany, China, Australia, and Japan). We also export products to over 130 other countries through our Global Markets Group using a broad network of third-party distributors. In 2024, we benefited from our expanded global footprint and expect to continue to focus on selectively expanding our global business.

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 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. Additionally, our focus on tight cost controls has enabled us to effectively navigate challenging economic conditions. However, the current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, including tariffs imposed by other countries in response to or in anticipation of U.S. tariffs, have resulted in uncertainty regarding the global economy and with respect to our operations and costs.

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, 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”), the 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”), the 2017 acquisitions of the VIVISCAL brand from Lifes2Good Holdings Limited (the “Viviscal Acquisition”), and the WATERPIK brand from Pik Holdings, Inc. (the “Waterpik Acquisition”), the 2020 acquisition of the ZICAM brand from Consumer Health Holdco LLC, the 2021 acquisition of the THERABREATH brand from Dr. Harold Katz, LLC and HK-IP International, Inc, 2022 acquisition of the HERO brand which includes the MIGHTY PATCH acne treatment products and 2024 acquisition of Graphico, Inc. (the “Graphico Acquisition”), a Japan-based distributor. 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 six of our seven “power brands.”

We believe we are well 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. Our focus is to maintain competitive marketing and

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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trade spending, manage our cost structure, continue to develop and launch new and differentiated products, while 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. Moreover, the generation of a significant amount of cash from operations 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. These factors position us to continue to increase stockholder value over the long-term.

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.

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. (US 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 $0.1 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 $14.7. 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

The Company has intangible assets of substantial value on its consolidated balance sheet. Intangible assets relate to intangible assets with a useful life, indefinite-lived trade names and goodwill. The Company determines whether an intangible asset (other than goodwill) has a useful life based on multiple factors, including how long the Company intends to generate cash flows from the asset.

Intangible assets with a useful life are assessed for impairment when there are business triggering events. Carrying values of goodwill and indefinite-lived trade names are reviewed at least annually for possible impairment.

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 and royalty 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. Fair value for indefinite-lived intangible assets is 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. 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. We determined that the fair value of all indefinite-lived intangible assets for each of the years in the three-year period ended December 31, 2024, exceeded their respective carrying values based upon the forecasted cash flows and profitability, with the exception of our VMS business described below.

During the third quarter of 2024, we continued to experience a decline in market share and a deterioration in the financial performance of our VMS business, which includes the VITAFUSION and L'IL CRITTERS trade name, primarily due to significant product competition coming from new category entrants, including private label. The continued decline in profitability caused management to reassess its

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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long-term strategy and financial outlook of the business. The revised financial outlook reflects lower estimates of future sales growth and cash flows which resulted in a triggering event in the third quarter. The triggering event required the Company to review the carrying value of assets supporting the business. The assets supporting the VMS business include the VITAFUSION and L'IL CRITTERS indefinite-lived trade name, a definite-lived customer relationship intangible asset and PP&E specific to our VMS business.

We used an excess earnings discounted cash flow model to determine the fair value of the trade name. The assumptions used in the model require significant judgement in determining the expected future cash flows. The key assumptions utilized in our impairment analysis included, but were not limited to, net sales growth rates between -15.2% and 2.1%, EBITA margins in the low single digits, and a discount rate of 8.25%. Estimates are based on market conditions and management’s current expectation of the success of growth and profitability initiatives. The valuation resulted in a full impairment of the $281.3 trade name and a $15.8 impairment for the remaining carrying value of the customer relationship intangible asset. The remaining carry value of both the trade name and customer relationship intangible asset at December 31, 2024 is $0.0.

Our global WATERPIK business has continued to experience a significant decline in customer demand for many of its products, primarily due to lower consumer spending for discretionary products resulting in part from inflation and a growing number of water flosser consumers switching to more value-branded products. As a result, the WATERPIK business has experienced declining sales and profits resulting in a reduction in expected future cash flows which have eroded a substantial portion of the excess between the fair and carrying value of the trade name. This indefinite-lived intangible asset may be susceptible to impairment and a continued decline in fair value could trigger a future impairment charge of the WATERPIK trade name. 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. The carrying value of the WATERPIK trade name is $644.7 and fair value represented 135% of the carrying value as of October 1, 2024. The fair value represented 109% of the carrying value as of October 1, 2023. The increase in fair value is mainly attributable to a favorable tariff ruling on certain Waterpik products imported from China.

In the fourth quarter of 2022, we determined that a review of our ability to recover the carrying values of the global FINISHING TOUCH FLAWLESS intangible assets was necessary based on the discontinuance of certain products at a major retailer. The FINISHING TOUCH FLAWLESS assets consist of the definite-lived trade name, customer relationships and technology assets recorded at acquisition. We evaluated our ability to recover the carrying values of the intangible assets by comparing the carrying amount to the future undiscounted cash flows and determined that the cash flows would not be sufficient to recover the carrying value of the assets. After determining the estimated fair value of the assets, which included a reduction in cash flows due to the loss of distribution mentioned above along with an expected continued decline in discretionary consumption and higher interest rates, a non-cash impairment charge of $411.0 was recorded in the fourth quarter of 2022. The remaining net book value of the trade name as of December 31, 2024 is $15.4 and will be amortized over a remaining useful life of one year.

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 and tariffs), (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 on the income statement. We adjust this liability as a result of changes in tax legislation, interpretations of laws by courts, guidance and rulings issued 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

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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authority could require the use of cash and result in an increase in our annual effective tax rate. Conversely, favorable resolution of an issue with a taxing authority would be recognized as a reduction to our annual effective tax rate.

New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements included in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2024.

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022

The discussion of consolidated results of operations presented below is followed by a more detailed discussion of results of operations by segment. This section of this Form 10-K generally discusses 2024 and 2023 results and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 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, 2023. The segment discussion also addresses certain product line information. Our operating segments are consistent with our reportable segments.

Consolidated results

2024 compared to 2023

[[GREPCENT_TABLE]]
[["","Twelve Months Ended","","","Change vs.","","Twelve Months Ended"],["","December 31, 2024","","","Prior Year","","December 31, 2023"],["Net Sales","$","6,107.1","","","4.1%","","$","5,867.9"],["Gross Profit","$","2,790.1","","","7.8%","","$","2,588.5"],["Gross Margin","","45.7","%","","160 basis points","","","44.1","%"],["Marketing Expenses","$","698.1","","","8.9%","","$","641.3"],["Percent of Net Sales","","11.4","%","","50 basis points","","","10.9","%"],["Selling, General & Administrative Expenses","$","927.8","","","4.3%","","$","889.8"],["Percent of Net Sales","","15.2","%","","0 basis points","","","15.2","%"],["VMS Trade name and other asset impairments","$","357.1","","","100.0%","","$","0"],["Percent of Net Sales","","5.8","%","","580 basis points","","","0.0","%"],["Income from Operations","$","807.1","","","-23.7%","","$","1,057.4"],["Operating Margin","","13.3","%","","-470 basis points","","","18.0","%"],["Net income per share - Diluted","$","2.37","","","-22.3%","","$","3.05"]]
[[/GREPCENT_TABLE]]

Net Sales

Net sales for the year ended December 31, 2024 were $6,107.1, an increase of $239.2, or 4.1% compared to 2023 net sales. The components of the net sales increase are as follows:

[[GREPCENT_TABLE]]
[["Net Sales - Consolidated","December 31, 2024"],["Product volumes sold(1)","","3.3","%"],["Pricing/Product mix(2)","","1.3","%"],["Exit of product lines (net of acquisition)(3)","","(0.5","%)"],["Net Sales increase","","4.1","%"]]
[[/GREPCENT_TABLE]]

(1)
The volume change reflects increased product unit sales in all three segments.

(2)
Price/mix was favorable in all three segments.

(3)
In the first quarter of 2024, we exited the MEGALAC supplement portion of the SPD Animal Nutrition business. In the second quarter of 2024 we acquired substantially all of Graphico and sold the Passport food safety business.

Gross Profit

Our gross profit for 2024 was $2,790.1, a $201.6 increase compared to 2023. Gross margin was 45.7% in 2024 compared to 44.1% in 2023, a 160 basis points (“bps”) increase. The increase is due to the positive impact of productivity programs of 140 bps, favorable price/volume/mix of 100 bps, a favorable tariff ruling of 50 bps, and benefits from the Graphico Acquisition of 10 bps, offset by the impact of higher manufacturing costs including labor and commodities of 140 bps.

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

Operating Costs

Marketing expenses for 2024 were $698.1, an increase of $56.8 compared to 2023. Marketing expenses as a percentage of net sales increased 50 bps to 11.4% in 2024 as compared to 2023 due to 90 bps on higher expense primarily from increased marketing spend to support new product introductions, offset by 40 bps of leverage on higher net sales.

SG&A expenses for 2024 were $927.8, a decrease of $38.0 or 4.3% compared to 2023. SG&A as a percentage of net sales was 15.2% in 2024 and 2023. SG&A as a percentage of net sales was flat compared to 2023, as expenses were higher by 60 bps, primarily due to growth investments in our international division, Research and Development ("R&D") and Information Technology ("IT"), and the Graphico acquisition, offset by 60 bps of leverage associated with higher sales.

Nonoperating Expenses

Trade name and other asset impairment charges were $357.1 million in 2024 related to non-cash charges to adjust the carrying value of intangible assets and property, plant, and equipment related to the VMS business. The impairment was due to a continued decline in market share and a deterioration in the financial performance for the VMS business, which includes the VITAFUSION and L'IL CRITTERS trade name, primarily due to significant product competition coming from new category entrants, including private label. See Note 7, “Goodwill and Other Intangibles, Net” to the Consolidated Financial Statements included herein for additional information.

Interest income was $26.3 in 2024, an increase of $13.3 as compared to 2023, due to higher interest income primarily associated with higher cash balances.

Interest expense in 2024 was $95.0, a decrease of $15.9 primarily due to lower average outstanding debt.

Other income increased $9.6 in 2024 as compared to 2023 primarily due to the sale of our 50% interest in Armakleen to our joint venture partner.

Taxation

The 2024 effective income tax rate was 22.6% compared to 21.9% in 2023. The increase in the rate is due to lower stock option benefits related to executive compensation and other non-recurring tax items.

Segment results for 2024, 2023 and 2022

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.

[[GREPCENT_TABLE]]
[["Segment","Products / Other"],["Consumer Domestic","Household and personal care products"],["Consumer International","Primarily personal care products"],["SPD","Specialty Products"],["Corporate","Equity in earnings of affiliates"]]
[[/GREPCENT_TABLE]]

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CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

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Segment net sales and income from operations for each of the three years ended December 31, 2024, 2023 and 2022 were as follows:

[[GREPCENT_TABLE]]
[["","Consumer","","","Consumer"],["","Domestic","","","International","","","SPD","","","Total"],["Net Sales"],["2024","$","4,732.3","","","$","1,071.5","","","$","303.3","","","$","6,107.1"],["2023","","4,571.2","","","","975.7","","","","321.0","","","","5,867.9"],["2022","","4,131.0","","","","896.1","","","","348.5","","","","5,375.6"],["Income from Operations"],["2024(1)","$","684.9","","","$","83.1","","","$","39.1","","","$","807.1"],["2023","","929.7","","","","104.2","","","","23.5","","","","1,057.4"],["2022(2)","","499.1","","","","46.2","","","","52.5","","","","597.8"]]
[[/GREPCENT_TABLE]]

(1)
2024 results include the VMS non-cash intangible and PP&E impairment charges of $357.1 in SG&A expenses, of which $327.4 was recorded in the Consumer Domestic segment and $29.7 was recorded in the Consumer International segment.

(2)
2022 results include the FLAWLESS non-cash intangible asset impairment charges of $411.0 in SG&A expenses, of which $349.3 was recorded in the Consumer Domestic segment and $61.7 was recorded in the Consumer International segment.

Product line revenues for external customers for the years ended December 31, 2024, 2023 and 2022 were as follows:

[[GREPCENT_TABLE]]
[["","","2024","","","2023","","","2022"],["Household Products","","$","2,584.3","","","$","2,484.1","","","$","2,272.0"],["Personal Care Products","","","2,148.0","","","","2,087.1","","","","1,859.0"],["Total Consumer Domestic","","","4,732.3","","","","4,571.2","","","","4,131.0"],["Total Consumer International","","","1,071.5","","","","975.7","","","","896.1"],["Total SPD","","","303.3","","","","321.0","","","","348.5"],["Total Consolidated Net Sales","","$","6,107.1","","","$","5,867.9","","","$","5,375.6"]]
[[/GREPCENT_TABLE]]

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.

45

CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

Consumer Domestic

2024 compared to 2023

Consumer Domestic net sales in 2024 were $4,732.3, an increase of $161.1 or 3.5% compared to net sales of $4,571.2 in 2023. The components of the net sales change are the following:

[[GREPCENT_TABLE]]
[["Net Sales - Consumer Domestic","December 31, 2024"],["Product volumes sold","","2.8","%"],["Pricing/Product mix","","0.7","%"],["Net Sales increase","","3.5","%"]]
[[/GREPCENT_TABLE]]

The increase in net sales for 2024 includes growth from THERABREATH® mouth wash, HERO® acne treatment products, ARM & HAMMER® liquid detergent, ARM & HAMMER® cat litter, and ARM & HAMMER® baking soda, partially offset by declines in VITAFUSION® and L’IL CRITTERS® gummy vitamins, FINISHING TOUCH FLAWLESS® hair removal products, and WATERPIK® Shower Heads.

Consumer Domestic income from operations for 2024 was $684.9, a $244.8 decrease as compared to 2023. The decrease is due to the VMS non-cash intangible and PP&E impairment charges of $327.4. Excluding the non-cash impairment charges, Consumer Domestic income from operations increased by $82.6 driven by higher sales volumes of $77.2, the benefit of productivity programs of $75.6, favorable price/mix of $22.9, and a favorable tariff ruling of $31.6, partially offset by higher manufacturing and distribution expenses of $62.5, higher SG&A expenses of $32.6 from growth investments, and higher marketing expenses of $29.0.

Consumer International

2024 compared to 2023

Consumer International net sales in 2024 were $1,071.5, an increase of $95.8 or 9.8% as compared to 2023. The components of the net sales change are the following:

[[GREPCENT_TABLE]]
[["Net Sales - Consumer International","December 31, 2024"],["Product volumes sold","","5.7","%"],["Pricing/Product mix","","3.3","%"],["Foreign exchange rate fluctuations","","(0.2","%)"],["Acquired product lines (1)","","1.0","%"],["Net Sales increase","","9.8","%"]]
[[/GREPCENT_TABLE]]

(1)
The Graphico acquisition is included in our results since June 3, 2024, the date of acquisition.

Excluding the impact of foreign exchange rates and the Graphico acquisition, the increase in net sales for the year ended December 31, 2024, was driven by OXICLEAN® stain removers, THERABREATH® mouth wash, ULTRAMAX® antiperspirant deodorant, and VITAFUSION® and L’IL CRITTERS® gummy vitamins in GMG, HERO® acne treatment products in Europe, HERO® acne treatment products in Canada, and THERABREATH® mouth wash in Mexico.

Consumer International income from operations was $83.1 in 2024, a decrease of $21.1 compared to 2023 due to the VMS non-cash intangible and PP&E impairment charges of $29.7. Excluding the non-cash impairment charges, Consumer International income from operations increased $8.6 and was driven by favorable price/mix of $36.2, higher sales volumes of $27.1, partially offset by higher marketing expenses of $29.2, higher SG&A expenses of $21.2 from growth investments, unfavorable foreign exchange rates of $3.4 and higher manufacturing and commodity costs of $0.6.

46

CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

Specialty Products

2024 compared to 2023

SPD net sales were $303.3 for 2024, a decrease of $17.7, or 5.5% compared to 2023. The components of the net sales change are the following:

[[GREPCENT_TABLE]]
[["Net Sales - SPD","December 31, 2024"],["Product volumes sold","","4.0","%"],["Pricing/Product mix","","3.1","%"],["Exit of product lines (1)","","(12.6","%)"],["Net Sales decrease","","(5.5","%)"]]
[[/GREPCENT_TABLE]]

(1) We exited the MEGALAC supplement portion of the Animal Nutrition business in the first quarter of 2024 and sold the Passport food safety business in the second quarter of 2024.

Net sales excluding product line divestitures increased in the year ended December 31, 2024 primarily due to growth in our animal nutrition and specialty chemicals segments.

SPD income from operations was $39.1 in 2024, an increase of $15.6 compared to 2023. The increase in income from operations for 2024 is due to favorable price/mix of $9.1, higher sales volumes of $3.4, lower SG&A costs of $9.1 primarily from product line exits, and lower marketing expenses of $1.4, partially offset by the gross margin impact of product line exits of $7.1, and unfavorable manufacturing costs of $0.4.

Corporate

Corporate includes administrative costs of the production, planning and logistics functions which are reported as Cost of Sales in our Consolidated Statements of Income but are allocated to the operating segments in SG&A expenses to determine segment income from operations. Such amounts were $67.9, $60.4 and $34.3 for 2024, 2023 and 2022, respectively. The increase in 2023 compared to 2022 is primarily due to higher incentive compensation costs.

Also included in corporate are the equity in earnings of affiliates from Armand and ArmaKleen, totaling $9.1, $8.7 and $12.3 for the three years ended December 31, 2024, 2023 and 2022, respectively. In October 2024, the Company sold its 50% interest in ArmaKleen to our joint venture partner.

Liquidity and Capital Resources

On June 16, 2022, we entered into a credit agreement (the “Credit Agreement”) that provides for our $1,500.0 unsecured revolving credit facility (the “Revolving Credit Facility”) that matures on June 16, 2027, unless extended. We have the ability to increase our borrowing up to an additional $750.0, subject to lender commitments and certain conditions as described in the Credit Agreement. Borrowings under the Credit Agreement are available for general corporate purposes and are used to support our $1,500.0 commercial paper program.

As of December 31, 2024, we had $964.1 in cash and cash equivalents, and approximately $1,494.0 available through the Revolving Credit Facility and our commercial paper program. To preserve our liquidity, we invest cash primarily in government money market funds, prime money market funds, short-term commercial paper and short-term bank deposits.

On October 31, 2022, we issued $500.0 aggregate principal amount of 5.60% Senior Notes due 2032 (the “2032 Notes”). The proceeds from the sale of the 2032 Notes were used to repay commercial paper debt incurred to finance the Hero Acquisition, and related fees and expenses. The 2032 Notes will mature on November 15, 2032, unless earlier retired or redeemed pursuant to the terms of the supplemental indenture governing the terms of the 2032 Notes.

On June 2, 2022, we issued $500.0 aggregate principal amount of 5.00% Senior Notes due 2052 (the “2052 Notes”). In July 2022 a portion of the proceeds from the sale of the 2052 Notes were used to repay all of our outstanding $300.0 2.45% Senior Notes due August 1, 2022. The 2052 Notes will mature on June 15, 2052, unless earlier retired or redeemed pursuant to the terms of the supplemental indenture governing the terms of the 2052 Notes.

In October 2022, we repaid all of the outstanding $400.0 2.875% Senior notes due October 1, 2022 with a portion of the proceeds from the 2052 Notes and cash on hand.

47

CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

On December 22, 2021, we entered into a $400.0 unsecured term loan facility (as amended on June 16, 2022, the “Term Loan Facility”) with various banks. The loan under the Term Loan Facility (the “Term Loan”) was fully drawn at closing. The Term Loan was due on December 22, 2024. The interest rate was the Secured Overnight Financing Rate (“SOFR”) plus a spread and an applicable margin based on the Company’s credit rating, which can range from 60 basis points to 125 bps. The proceeds of the Term Loan were used to partially fund the TheraBreath Acquisition, with the remaining proceeds used for the repayment of commercial paper. In 2023, we repaid $200.0 of the Term Loan with cash on hand and commercial paper borrowings. In the first quarter of 2024, we repaid the remaining $200.0 of the Term Loan with cash on hand.

Additionally, we financed the TheraBreath Acquisition with a portion of the proceeds from an underwritten public offering of $400.0 aggregate principal amount of 2.3% Senior Notes due 2031 (the “2031 Notes”) completed on December 10, 2021. The 2031 Notes will mature on December 15, 2031, unless earlier retired or redeemed pursuant to the terms of the supplemental indenture governing the terms of the 2031 Notes.

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 that were due in 2022 and have been fully repaid, $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.

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. We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth. We do not anticipate that current economic conditions will adversely affect our ability to comply with the financial covenant in the Credit Agreement because we currently are, and anticipate that we will continue to be, in compliance with the maximum leverage ratio requirement under the Credit Agreement.

On October 28, 2021, the Board authorized a new share repurchase program, under which we may repurchase up to $1,000.0 in shares of Common Stock (the “2021 Share Repurchase Program”). The 2021 Share Repurchase Program does not have an expiration. The 2021 Share Repurchase Program did not modify our evergreen share repurchase program, authorized by the Board on January 29, 2014, under which we may repurchase, from time to time, Common Stock to reduce or eliminate dilution associated with issuances of Common Stock under its incentive plans.

As a result of our stock repurchases, there remains $658.9 of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2024.

On January 29, 2025, the Board declared a 4% increase in the regular quarterly dividend from $0.28375 to $0.295 per share, equivalent to an annual dividend of $1.18 per share payable to stockholders of record as of February 14, 2025. The increase raises the annual dividend payout from $277.0 to approximately $287.0 on an annualized basis.

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, pay dividends at the latest approved rate, and meet our capital expenditure program costs, which are expected to be approximately $130.0 in 2025 including manufacturing capacity investments for Therabreath and Sterimar and an ERP project. Cash, together with our current borrowing capacity, may be used for acquisitions that would complement our existing product lines or geographic markets.

48

CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

Cash Flow Analysis

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31,","","","December 31,","","","December 31,"],["","2024","","","2023","","","2022"],["Net cash provided by operating activities","$","1,156.2","","","$","1,030.6","","","$","885.2"],["Net cash used in investing activities","$","(183.3",")","","$","(234.3",")","","$","(728.6",")"],["Net cash used in financing activities","$","(343.4",")","","$","(725.6",")","","$","(120.9",")"]]
[[/GREPCENT_TABLE]]

2024 compared to 2023

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 2024 increased by $125.6 to $1,156.2 as compared to $1,030.6 in 2023 primarily due to an increase in cash earnings (net income adjusted for non-cash items). We measure working capital effectiveness based on our cash conversion cycle. The following table presents our cash conversion cycle information for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","As of"],["","December 31, 2024","","","December 31, 2023","","","Change"],["Days of sales outstanding in accounts receivable (\"DSO\")","","34","","","","29","","","","5"],["Days of inventory outstanding (\"DIO\")","","67","","","","70","","","","(3",")"],["Days of accounts payable outstanding (\"DPO\")","","73","","","","72","","","","(1",")"],["Cash conversion cycle","","28","","","","27","","","","1"]]
[[/GREPCENT_TABLE]]

Our cash conversion cycle (defined as the sum of DSO plus DIO less DPO) at December 31, 2024, which is calculated using a two period average method, increased one day from the prior year. The change in cash conversion cycle is due to an increase in DSO primarily from a reduction in our accounts receivable factoring program in response to higher interest rates, partially offset with a decrease in DIO mainly from a reduction in inventory related to our discretionary brands and an increase in DPO primarily from agreeing to extended payment terms with some vendors. We continue to focus on reducing our working capital requirements.

Net Cash Used in Investing Activities – Net cash used in investing activities during 2024 was $183.3, primarily reflecting property, plant and equipment additions of $179.8 and $19.9 for the Graphico Acquisition, partially offset by $14.0 of proceeds from the sale of assets (including the ArmaKleen joint venture). Net cash used in investing activities during 2023 was $234.3, primarily reflecting property, plant and equipment additions of $223.5.

Net Cash Used in Financing Activities – Net cash used in financing activities during the twelve months of 2024 was $343.4 reflecting $208.2 of net debt payments and $277.0 of cash dividend payments, partially offset by $142.9 of proceeds from stock option exercises. Net cash used in financing activities during the twelve months of 2023 was $725.6, reflecting $300.1 of treasury stock purchases, $266.5 of cash dividend payments and $270.6 of net debt repayments, partially offset by $111.7 of proceeds from stock option exercises.

49

CHURCH & DWIGHT CO., INC AND SUBSIDIARIES

(Dollars in millions, except share and per share data)

OTHER ITEMS

Market risk

Concentration of Risk

A group of four customers accounted for approximately 43% and 44% of consolidated net sales in 2024 and 2023, respectively. A group of four customers accounted for approximately 42% of consolidated net sales in 2022, of which a single customer (Walmart Inc. and its affiliates) accounted for approximately 23%, 23% and 24% in 2024, 2023 and 2022, respectively.

Interest Rate Risk

We had outstanding total debt at December 31, 2024, of $2,204.6, net of debt issuance costs, all of which has a fixed weighted average interest rate of 4.1%. From time to time the Company will enter into interest rate lock agreements to hedge the risk of changes in the interest payments attributable to changes in the interest rate associated with anticipated issuances of debt.

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 our Common Stock. Refer to Note 3 to the Consolidated Financial Statements included in this Annual Report 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.