UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-225
KIMBERLY-CLARK CORPORATONCORPORATION
(Exact name of registrant as specified in its charter
| | | | | | | | |
Delaware | | 39-0394230 |
(State or other jurisdiction of incorporation) | | (I.R.S. Employer Identification No.) |
P.O. Box 619100
Dallas, TX
75261-9100
(Address of principal executive offices)
(Zip code)
(972) 281-1200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | KMB | New York Stock Exchange |
0.625% Notes due 2024 | KMB24 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | x | | Accelerated��Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
As of October 18, 2021,April 15, 2022, there were 336,716,722336,925,493 shares of the Corporation's common stock outstanding.
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
| | | Three Months Ended September 30 | | Nine Months Ended September 30 | | Three Months Ended March 31 | |
(Millions of dollars, except per share amounts) | (Millions of dollars, except per share amounts) | | 2021 | | 2020 | | 2021 | | 2020 | (Millions of dollars, except per share amounts) | | 2022 | | 2021 | |
Net Sales | Net Sales | | $ | 5,010 | | | $ | 4,683 | | | $ | 14,475 | | | $ | 14,304 | | Net Sales | | $ | 5,095 | | | $ | 4,743 | | |
Cost of products sold | Cost of products sold | | 3,527 | | | 3,093 | | | 9,923 | | | 9,146 | | Cost of products sold | | 3,575 | | | 3,154 | | |
Gross Profit | Gross Profit | | 1,483 | | | 1,590 | | | 4,552 | | | 5,158 | | Gross Profit | | 1,520 | | | 1,589 | | |
Marketing, research and general expenses | Marketing, research and general expenses | | 819 | | | 919 | | | 2,488 | | | 2,636 | | Marketing, research and general expenses | | 886 | | | 815 | | |
Other (income) and expense, net | Other (income) and expense, net | | 7 | | | 5 | | | 24 | | | 27 | | Other (income) and expense, net | | (59) | | | 4 | | |
Operating Profit | Operating Profit | | 657 | | | 666 | | | 2,040 | | | 2,495 | | Operating Profit | | 693 | | | 770 | | |
Nonoperating expense | Nonoperating expense | | (10) | | | (40) | | | (71) | | | (57) | | Nonoperating expense | | (4) | | | (6) | | |
Interest income | Interest income | | 1 | | | 2 | | | 4 | | | 6 | | Interest income | | 2 | | | 1 | | |
Interest expense | Interest expense | | (64) | | | (62) | | | (192) | | | (188) | | Interest expense | | (65) | | | (63) | | |
Income Before Income Taxes and Equity Interests | Income Before Income Taxes and Equity Interests | | 584 | | | 566 | | | 1,781 | | | 2,256 | | Income Before Income Taxes and Equity Interests | | 626 | | | 702 | | |
Provision for income taxes | Provision for income taxes | | (126) | | | (114) | | | (386) | | | (510) | | Provision for income taxes | | (114) | | | (147) | | |
Income Before Equity Interests | Income Before Equity Interests | | 458 | | | 452 | | | 1,395 | | | 1,746 | | Income Before Equity Interests | | 512 | | | 555 | | |
Share of net income of equity companies | Share of net income of equity companies | | 21 | | | 31 | | | 88 | | | 104 | | Share of net income of equity companies | | 23 | | | 39 | | |
Net Income | Net Income | | 479 | | | 483 | | | 1,483 | | | 1,850 | | Net Income | | 535 | | | 594 | | |
Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | | (10) | | | (11) | | | (26) | | | (37) | | Net income attributable to noncontrolling interests | | (12) | | | (10) | | |
Net Income Attributable to Kimberly-Clark Corporation | Net Income Attributable to Kimberly-Clark Corporation | | $ | 469 | | | $ | 472 | | | $ | 1,457 | | | $ | 1,813 | | Net Income Attributable to Kimberly-Clark Corporation | | $ | 523 | | | $ | 584 | | |
| Per Share Basis | Per Share Basis | | Per Share Basis | | |
Net Income Attributable to Kimberly-Clark Corporation | Net Income Attributable to Kimberly-Clark Corporation | | Net Income Attributable to Kimberly-Clark Corporation | | |
Basic | Basic | | $ | 1.39 | | | $ | 1.38 | | | $ | 4.32 | | | $ | 5.32 | | Basic | | $ | 1.55 | | | $ | 1.73 | | |
Diluted | Diluted | | $ | 1.39 | | | $ | 1.38 | | | $ | 4.31 | | | $ | 5.30 | | Diluted | | $ | 1.55 | | | $ | 1.72 | | |
|
See notes to the unaudited interim consolidated financial statements.
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | Three Months Ended September 30 | | Nine Months Ended September 30 | | | Three Months Ended March 31 | |
(Millions of dollars) | (Millions of dollars) | | 2021 | | 2020 | | 2021 | | 2020 | (Millions of dollars) | | 2022 | | 2021 | |
Net Income | Net Income | | $ | 479 | | | $ | 483 | | | $ | 1,483 | | | $ | 1,850 | | Net Income | | $ | 535 | | | $ | 594 | | |
Other Comprehensive Income (Loss), Net of Tax | Other Comprehensive Income (Loss), Net of Tax | | | | | | | | | Other Comprehensive Income (Loss), Net of Tax | | | | | |
Unrealized currency translation adjustments | Unrealized currency translation adjustments | | (151) | | | 38 | | | (288) | | | (236) | | Unrealized currency translation adjustments | | 53 | | | (215) | | |
Employee postretirement benefits | Employee postretirement benefits | | 16 | | | — | | | 45 | | | 39 | | Employee postretirement benefits | | 11 | | | 18 | | |
Other | Other | | 35 | | | (3) | | | 93 | | | 5 | | Other | | (9) | | | 36 | | |
Total Other Comprehensive Income (Loss), Net of Tax | Total Other Comprehensive Income (Loss), Net of Tax | | (100) | | | 35 | | | (150) | | | (192) | | Total Other Comprehensive Income (Loss), Net of Tax | | 55 | | | (161) | | |
Comprehensive Income | Comprehensive Income | | 379 | | | 518 | | | 1,333 | | | 1,658 | | Comprehensive Income | | 590 | | | 433 | | |
Comprehensive (income) loss attributable to noncontrolling interests | Comprehensive (income) loss attributable to noncontrolling interests | | 1 | | | (16) | | | (8) | | | (34) | | Comprehensive (income) loss attributable to noncontrolling interests | | (8) | | | (3) | | |
Comprehensive Income Attributable to Kimberly-Clark Corporation | Comprehensive Income Attributable to Kimberly-Clark Corporation | | $ | 380 | | | $ | 502 | | | $ | 1,325 | | | $ | 1,624 | | Comprehensive Income Attributable to Kimberly-Clark Corporation | | $ | 582 | | | $ | 430 | | |
See notes to the unaudited interim consolidated financial statements.
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(20212022 Data is Unaudited)
| (Millions of dollars) | (Millions of dollars) | | September 30, 2021 | | December 31, 2020 | | (Millions of dollars) | | March 31, 2022 | | December 31, 2021 | |
ASSETS | ASSETS | | | | | | ASSETS | | | | | |
Current Assets | Current Assets | | | Current Assets | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 286 | | | $ | 303 | | | Cash and cash equivalents | | $ | 493 | | | $ | 270 | | |
Accounts receivable, net | Accounts receivable, net | | 2,399 | | | 2,235 | | | Accounts receivable, net | | 2,516 | | | 2,207 | | |
Inventories | Inventories | | 2,098 | | | 1,903 | | | Inventories | | 2,265 | | | 2,239 | | |
Other current assets | Other current assets | | 843 | | | 733 | | | Other current assets | | 629 | | | 849 | | |
Total Current Assets | Total Current Assets | | 5,626 | | | 5,174 | | | Total Current Assets | | 5,903 | | | 5,565 | | |
Property, Plant and Equipment, Net | Property, Plant and Equipment, Net | | 7,964 | | | 8,042 | | | Property, Plant and Equipment, Net | | 8,114 | | | 8,097 | | |
Investments in Equity Companies | Investments in Equity Companies | | 340 | | | 300 | | | Investments in Equity Companies | | 266 | | | 290 | | |
Goodwill | Goodwill | | 1,796 | | | 1,895 | | | Goodwill | | 2,177 | | | 1,840 | | |
Other Intangible Assets, Net | Other Intangible Assets, Net | | 810 | | | 832 | | | Other Intangible Assets, Net | | 926 | | | 810 | | |
Other Assets | Other Assets | | 1,239 | | | 1,280 | | | Other Assets | | 1,286 | | | 1,235 | | |
TOTAL ASSETS | TOTAL ASSETS | | $ | 17,775 | | | $ | 17,523 | | | TOTAL ASSETS | | $ | 18,672 | | | $ | 17,837 | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | |
Current Liabilities | Current Liabilities | | | Current Liabilities | | |
Debt payable within one year | Debt payable within one year | | $ | 1,387 | | | $ | 486 | | | Debt payable within one year | | $ | 969 | | | $ | 433 | | |
Trade accounts payable | Trade accounts payable | | 3,519 | | | 3,336 | | | Trade accounts payable | | 3,846 | | | 3,840 | | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | | 1,972 | | | 2,262 | | | Accrued expenses and other current liabilities | | 2,054 | | | 2,096 | | |
Dividends payable | Dividends payable | | 380 | | | 359 | | | Dividends payable | | 388 | | | 380 | | |
Total Current Liabilities | Total Current Liabilities | | 7,258 | | | 6,443 | | | Total Current Liabilities | | 7,257 | | | 6,749 | | |
Long-Term Debt | Long-Term Debt | | 7,555 | | | 7,878 | | | Long-Term Debt | | 8,101 | | | 8,141 | | |
Noncurrent Employee Benefits | Noncurrent Employee Benefits | | 869 | | | 864 | | | Noncurrent Employee Benefits | | 797 | | | 809 | | |
Deferred Income Taxes | Deferred Income Taxes | | 701 | | | 723 | | | Deferred Income Taxes | | 687 | | | 694 | | |
Other Liabilities | Other Liabilities | | 657 | | | 718 | | | Other Liabilities | | 716 | | | 681 | | |
Redeemable Preferred Securities of Subsidiaries | | 28 | | | 28 | | | |
Redeemable Common and Preferred Securities of Subsidiaries | | Redeemable Common and Preferred Securities of Subsidiaries | | 260 | | | 26 | | |
Stockholders' Equity | Stockholders' Equity | | | Stockholders' Equity | | |
Kimberly-Clark Corporation | Kimberly-Clark Corporation | | | Kimberly-Clark Corporation | | |
Preferred stock - no par value - authorized 20.0 million shares, none issued | Preferred stock - no par value - authorized 20.0 million shares, none issued | | — | | | — | | | Preferred stock - no par value - authorized 20.0 million shares, none issued | | — | | | — | | |
Common stock - $1.25 par value - authorized 1.2 billion shares; issued 378.6 million shares at September 30, 2021 and December 31, 2020 | | 473 | | | 473 | | | |
Common stock - $1.25 par value - authorized 1.2 billion shares; issued 378.6 million shares at March 31, 2022 and December 31, 2021 | | Common stock - $1.25 par value - authorized 1.2 billion shares; issued 378.6 million shares at March 31, 2022 and December 31, 2021 | | 473 | | | 473 | | |
Additional paid-in capital | Additional paid-in capital | | 614 | | | 657 | | | Additional paid-in capital | | 599 | | | 605 | | |
Common stock held in treasury, at cost - 41.9 and 39.9 million shares at September 30, 2021 and December 31, 2020, respectively | | (5,191) | | | (4,899) | | | |
Common stock held in treasury, at cost - 41.6 and 41.8 million shares at March 31, 2022 and December 31, 2021, respectively | | Common stock held in treasury, at cost - 41.6 and 41.8 million shares at March 31, 2022 and December 31, 2021, respectively | | (5,175) | | | (5,183) | | |
Retained earnings | Retained earnings | | 7,883 | | | 7,567 | | | Retained earnings | | 7,988 | | | 7,858 | | |
Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | | (3,305) | | | (3,172) | | | Accumulated other comprehensive income (loss) | | (3,180) | | | (3,239) | | |
Total Kimberly-Clark Corporation Stockholders' Equity | Total Kimberly-Clark Corporation Stockholders' Equity | | 474 | | | 626 | | | Total Kimberly-Clark Corporation Stockholders' Equity | | 705 | | | 514 | | |
Noncontrolling Interests | Noncontrolling Interests | | 233 | | | 243 | | | Noncontrolling Interests | | 149 | | | 223 | | |
Total Stockholders' Equity | Total Stockholders' Equity | | 707 | | | 869 | | | Total Stockholders' Equity | | 854 | | | 737 | | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 17,775 | | | $ | 17,523 | | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 18,672 | | | $ | 17,837 | | |
See notes to the unaudited interim consolidated financial statements.
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2021 | | |
(Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | | |
| Shares | | Amount | | | Shares | | Amount | | | |
Balance at June 30, 2021 | | 378,597 | | | $ | 473 | | | $ | 627 | | | 41,661 | | | $ | (5,159) | | | $ | 7,798 | | | $ | (3,215) | | | $ | 234 | | | $ | 758 | | | |
Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 469 | | | — | | | 10 | | | 479 | | | |
Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (89) | | | (11) | | | (100) | | | |
Stock-based awards exercised or vested | | — | | | — | | | (1) | | | (237) | | | 26 | | | — | | | — | | | — | | | 25 | | | |
Shares repurchased | | — | | | — | | | — | | | 429 | | | (58) | | | — | | | — | | | — | | | (58) | | | |
Recognition of stock-based compensation | | — | | | — | | | (13) | | | — | | | — | | | — | | | — | | | — | | | (13) | | | |
Dividends declared ($1.14 per share) | | — | | | — | | | — | | | — | | | — | | | (384) | | | — | | | — | | | (384) | | | |
Other | | — | | | — | | | 1 | | | — | | | — | | | — | | | (1) | | | — | | | — | | | |
Balance at September 30, 2021 | | 378,597 | | | $ | 473 | | | $ | 614 | | | 41,853 | | | $ | (5,191) | | | $ | 7,883 | | | $ | (3,305) | | | $ | 233 | | | $ | 707 | | | |
| | | Nine Months Ended September 30, 2021 | | | Three Months Ended March 31, 2022 | |
(Millions of dollars, shares in thousands, except per share amounts) | (Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | | (Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | |
| Shares | | Amount | | Shares | | Amount | | | (Millions of dollars, shares in thousands, except per share amounts) | | Shares | | Amount | | Additional Paid-in Capital | Shares | | Amount | | Retained Earnings | Total Stockholders' Equity |
Balance at December 31, 2020 | | 378,597 | | | $ | 473 | | | $ | 657 | | | 39,873 | | | $ | (4,899) | | | $ | 7,567 | | | $ | (3,172) | | | $ | 243 | | | $ | 869 | | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | | 378,597 | | | $ | 473 | | | $ | 605 | | | 41,762 | | | $ | (5,183) | | | $ | 7,858 | | | $ | (3,239) | | | $ | 223 | | | $ | 737 | | |
Net income in stockholders' equity, excludes redeemable interests' share | Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 1,457 | | | — | | | 25 | | | 1,482 | | | Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 523 | | | — | | | 12 | | | 535 | | |
Other comprehensive income, net of tax, excludes redeemable interests' share | Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (132) | | | (18) | | | (150) | | | Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | 59 | | | (4) | | | 55 | | |
Stock-based awards exercised or vested | Stock-based awards exercised or vested | | — | | | — | | | (78) | | | (1,189) | | | 130 | | | — | | | — | | | — | | | 52 | | | Stock-based awards exercised or vested | | — | | | — | | | (26) | | | (347) | | | 35 | | | — | | | — | | | — | | | 9 | | |
Shares repurchased | Shares repurchased | | — | | | — | | | — | | | 3,169 | | | (422) | | | — | | | — | | | — | | | (422) | | | Shares repurchased | | — | | | — | | | — | | | 215 | | | (27) | | | — | | | — | | | — | | | (27) | | |
Recognition of stock-based compensation | Recognition of stock-based compensation | | — | | | — | | | 28 | | | — | | | — | | | — | | | — | | | — | | | 28 | | | Recognition of stock-based compensation | | — | | | — | | | 16 | | | — | | | — | | | — | | | — | | | — | | | 16 | | |
Dividends declared ($3.42 per share) | | — | | | — | | | — | | | — | | | — | | | (1,154) | | | — | | | (17) | | | (1,171) | | | |
Dividends declared ($1.16 per share) | | Dividends declared ($1.16 per share) | | — | | | — | | | — | | | — | | | — | | | (391) | | | — | | | (82) | | | (473) | | |
Other | Other | | — | | | — | | | 7 | | | — | | | — | | | 13 | | | (1) | | | — | | | 19 | | | Other | | — | | | — | | | 4 | | | — | | | — | | | (2) | | | — | | | — | | | 2 | | |
Balance at September 30, 2021 | | 378,597 | | | $ | 473 | | | $ | 614 | | | 41,853 | | | $ | (5,191) | | | $ | 7,883 | | | $ | (3,305) | | | $ | 233 | | | $ | 707 | | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | | 378,597 | | | $ | 473 | | | $ | 599 | | | 41,630 | | | $ | (5,175) | | | $ | 7,988 | | | $ | (3,180) | | | $ | 149 | | | $ | 854 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 | | |
(Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | | |
| Shares | | Amount | | | Shares | | Amount | | | |
Balance at December 31, 2020 | | 378,597 | | | $ | 473 | | | $ | 657 | | | 39,873 | | | $ | (4,899) | | | $ | 7,567 | | | $ | (3,172) | | | $ | 243 | | | $ | 869 | | | |
Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 584 | | | — | | | 9 | | | 593 | | | |
Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (154) | | | (7) | | | (161) | | | |
Stock-based awards exercised or vested | | — | | | — | | | (24) | | | (315) | | | 34 | | | — | | | — | | | — | | | 10 | | | |
Shares repurchased | | — | | | — | | | — | | | 1,398 | | | (185) | | | — | | | — | | | — | | | (185) | | | |
Recognition of stock-based compensation | | — | | | — | | | 22 | | | — | | | — | | | — | | | — | | | — | | | 22 | | | |
Dividends declared ($1.14 per share) | | — | | | — | | | — | | | — | | | — | | | (385) | | | — | | | (18) | | | (403) | | | |
Other | | — | | | — | | | 3 | | | — | | | — | | | (2) | | | (1) | | | 1 | | | 1 | | | |
Balance at March 31, 2021 | | 378,597 | | | $ | 473 | | | $ | 658 | | | 40,956 | | | $ | (5,050) | | | $ | 7,764 | | | $ | (3,327) | | | $ | 228 | | | $ | 746 | | | |
See notes to the unaudited interim consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2020 | | |
(Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | | |
| Shares | | Amount | | | Shares | | Amount | | | |
Balance at June 30, 2020 | | 378,597 | | | $ | 473 | | | $ | 554 | | | 37,574 | | | $ | (4,545) | | | $ | 7,299 | | | $ | (3,513) | | | $ | 227 | | | $ | 495 | | | |
Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 472 | | | — | | | 10 | | | 482 | | | |
Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | 30 | | | 6 | | | 36 | | | |
Stock-based awards exercised or vested | | — | | | — | | | (2) | | | (672) | | | 79 | | | — | | | — | | | — | | | 77 | | | |
Shares repurchased | | — | | | — | | | — | | | 1,280 | | | (195) | | | — | | | — | | | — | | | (195) | | | |
Recognition of stock-based compensation | | — | | | — | | | 45 | | | — | | | — | | | — | | | — | | | — | | | 45 | | | |
Dividends declared ($1.07 per share) | | — | | | — | | | — | | | — | | | — | | | (365) | | | — | | | — | | | (365) | | | |
Other | | — | | | — | | | 13 | | | — | | | — | | | (11) | | | 1 | | | (1) | | | 2 | | | |
Balance at September 30, 2020 | | 378,597 | | | $ | 473 | | | $ | 610 | | | 38,182 | | | $ | (4,661) | | | $ | 7,395 | | | $ | (3,482) | | | $ | 242 | | | $ | 577 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 | | |
(Millions of dollars, shares in thousands, except per share amounts) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interests | | Total Stockholders' Equity | | |
| Shares | | Amount | | | Shares | | Amount | | | |
Balance at December 31, 2019 | | 378,597 | | | $ | 473 | | | $ | 556 | | | 37,149 | | | $ | (4,454) | | | $ | 6,686 | | | $ | (3,294) | | | $ | 227 | | | $ | 194 | | | |
Net income in stockholders' equity, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | 1,813 | | | — | | | 34 | | | 1,847 | | | |
Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (189) | | | (2) | | | (191) | | | |
Stock-based awards exercised or vested | | — | | | — | | | (54) | | | (2,294) | | | 266 | | | — | | | — | | | — | | | 212 | | | |
Shares repurchased | | — | | | — | | | — | | | 3,327 | | | (473) | | | — | | | — | | | — | | | (473) | | | |
Recognition of stock-based compensation | | — | | | — | | | 98 | | | — | | | — | | | — | | | — | | | — | | | 98 | | | |
Dividends declared ($3.21 per share) | | — | | | — | | | — | | | — | | | — | | | (1,095) | | | — | | | (17) | | | (1,112) | | | |
Other | | — | | | — | | | 10 | | | — | | | — | | | (9) | | | 1 | | | — | | | 2 | | | |
Balance at September 30, 2020 | | 378,597 | | | $ | 473 | | | $ | 610 | | | 38,182 | | | $ | (4,661) | | | $ | 7,395 | | | $ | (3,482) | | | $ | 242 | | | $ | 577 | | | |
See notes to the unaudited interim consolidated financial statements.
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
| | | Nine Months Ended September 30 | | | Three Months Ended March 31 | |
(Millions of dollars) | (Millions of dollars) | | 2021 | | 2020 | | (Millions of dollars) | | 2022 | | 2021 | |
Operating Activities | Operating Activities | | | | | | Operating Activities | | | | | |
Net income | Net income | | $ | 1,483 | | | $ | 1,850 | | | Net income | | $ | 535 | | | $ | 594 | | |
Depreciation and amortization | Depreciation and amortization | | 572 | | | 606 | | | Depreciation and amortization | | 188 | | | 189 | | |
Asset impairments | Asset impairments | | 3 | | | — | | | Asset impairments | | — | | | 3 | | |
Gain on previously held equity investment in Thinx | | Gain on previously held equity investment in Thinx | | (85) | | | — | | |
Stock-based compensation | Stock-based compensation | | 30 | | | 101 | | | Stock-based compensation | | 16 | | | 22 | | |
Deferred income taxes | Deferred income taxes | | (42) | | | (30) | | | Deferred income taxes | | (52) | | | (35) | | |
Net (gains) losses on asset dispositions | Net (gains) losses on asset dispositions | | 34 | | | 67 | | | Net (gains) losses on asset dispositions | | 6 | | | 4 | | |
Equity companies' earnings (in excess of) less than dividends paid | Equity companies' earnings (in excess of) less than dividends paid | | (25) | | | (53) | | | Equity companies' earnings (in excess of) less than dividends paid | | (23) | | | (39) | | |
Operating working capital | Operating working capital | | (432) | | | 292 | | | Operating working capital | | (369) | | | (400) | | |
Postretirement benefits | Postretirement benefits | | 39 | | | 7 | | | Postretirement benefits | | (14) | | | (15) | | |
Other | Other | | 6 | | | 2 | | | Other | | 2 | | | (2) | | |
Cash Provided by Operations | Cash Provided by Operations | | 1,668 | | | 2,842 | | | Cash Provided by Operations | | 204 | | | 321 | | |
Investing Activities | Investing Activities | | | | | | Investing Activities | | | | | |
Capital spending | Capital spending | | (734) | | | (894) | | | Capital spending | | (253) | | | (298) | | |
Proceeds from dispositions of property | | 31 | | | 5 | | | |
Acquisition of business, net of cash acquired | | Acquisition of business, net of cash acquired | | (34) | | | — | | |
Investments in time deposits | Investments in time deposits | | (632) | | | (509) | | | Investments in time deposits | | (83) | | | (159) | | |
Maturities of time deposits | Maturities of time deposits | | 598 | | | 404 | | | Maturities of time deposits | | 255 | | | 207 | | |
Other | Other | | 1 | | | 17 | | | Other | | (1) | | | 5 | | |
Cash Used for Investing | Cash Used for Investing | | (736) | | | (977) | | | Cash Used for Investing | | (116) | | | (245) | | |
Financing Activities | Financing Activities | | | | | | Financing Activities | | | | | |
Cash dividends paid | Cash dividends paid | | (1,133) | | | (1,087) | | | Cash dividends paid | | (384) | | | (359) | | |
Change in short-term debt | Change in short-term debt | | 854 | | | (497) | | | Change in short-term debt | | 834 | | | 744 | | |
Debt proceeds | Debt proceeds | | 5 | | | 1,842 | | | Debt proceeds | | — | | | 5 | | |
Debt repayments | Debt repayments | | (269) | | | (753) | | | Debt repayments | | (300) | | | (253) | | |
Proceeds from exercise of stock options | Proceeds from exercise of stock options | | 52 | | | 212 | | | Proceeds from exercise of stock options | | 23 | | | 10 | | |
Acquisitions of common stock for the treasury | Acquisitions of common stock for the treasury | | (393) | | | (449) | | | Acquisitions of common stock for the treasury | | (25) | | | (169) | | |
Other | Other | | (57) | | | (40) | | | Other | | (15) | | | (30) | | |
Cash Used for Financing | Cash Used for Financing | | (941) | | | (772) | | | Cash Used for Financing | | 133 | | | (52) | | |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | Effect of Exchange Rate Changes on Cash and Cash Equivalents | | (8) | | | (17) | | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | | 2 | | | (7) | | |
Change in Cash and Cash Equivalents | Change in Cash and Cash Equivalents | | (17) | | | 1,076 | | | Change in Cash and Cash Equivalents | | 223 | | | 17 | | |
Cash and Cash Equivalents - Beginning of Period | Cash and Cash Equivalents - Beginning of Period | | 303 | | | 442 | | | Cash and Cash Equivalents - Beginning of Period | | 270 | | | 303 | | |
Cash and Cash Equivalents - End of Period | Cash and Cash Equivalents - End of Period | | $ | 286 | | | $ | 1,518 | | | Cash and Cash Equivalents - End of Period | | $ | 493 | | | $ | 320 | | |
See notes to the unaudited interim consolidated financial statements.
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. The terms "Corporation," "Kimberly-Clark," "K-C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
Highly Inflationary Accounting in Argentina
GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiaries in Argentina (“K-C Argentina”). Under highly inflationary accounting, K-C Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material. As of September 30, 2021,March 31, 2022, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were approximately 1 percent of our consolidated net sales for the ninethree months ended September 30, 2021March 31, 2022 and 2020.
Recently Adopted Accounting Standard
In 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period. We adopted this standard as of January 1, 2021 on either a prospective basis or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to retained earnings as the amount was not material. The effects of this standard on our financial position, results of operations and cash flows were not material.2021.
Note 2. 2018 Global Restructuring Program2022 Acquisition
In January 2018,On February 24, 2022, we announcedcompleted our acquisition of a majority and controlling share of Thinx Inc. (“Thinx”), an industry leader in the 2018 Global Restructuring Program to reduce our structural cost base by streamliningreusable period and simplifying our manufacturing supply chain and overhead organization. We expect to close or sell 11 manufacturing facilities and expand production capacity at several others. We expect to exit or divest some lower-margin businesses that generate approximately 1 percentincontinence underwear category, for total consideration of $181 consisting of cash of $53, the fair value of our previously held equity investment of $127, and certain share-based award costs of $1.
We previously accounted for our ownership interest in Thinx as an equity method investment, but upon increasing our ownership to 58%, we began consolidating the operations of Thinx into our financial statements at the end of the first quarter of 2022. The consolidated results of operations for Thinx are reported in our Personal Care business segment on a one-month lag. The share of Thinx net sales.income and equity attributable to the third-party minority owner of Thinx is classified in our consolidated income statement within Net income attributable to noncontrolling interests and in our consolidated balance sheet within Redeemable Common and Preferred Securities of Subsidiaries. This noncontrolling equity interest is measured at the estimated redemption value, which approximates fair value.
We have substantially completed an initial purchase price allocation in which we utilized several generally accepted valuation methodologies to estimate the fair value of certain acquired assets. The restructuring is expectedprimary valuation methods included two forms of the Income Approach (i.e., the multi-period excess earnings method (distributor method) and the relief-from-royalty method). These valuation methodologies are commonly used to impact our organizations in all major geographies. Workforce reductions are expected to bevalue similar identifiable intangible assets in the rangeConsumer Packaged Goods industry. All of 6,300the selected valuation methodologies incorporate unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy in Accounting Standard Codification 820, Fair Value Measurements. In connection with these valuation methodologies, we are required to 6,400.
The restructuring is expectedmake estimates and assumptions regarding market comparable companies, revenue growth rates, operating margins, distributor and customer attrition rates, royalty rates, distributor margins, discount rates, etc., which are primarily based on cash flow forecasts, business plans, economic projections and other information available to be completed in 2021, with total costs now anticipated to be in the range of $2.1 billion to $2.2 billion pre-tax ($1.6 billion to $1.7 billion after tax). Cash costs are expected to be $1.15 billion to $1.2 billion, primarily related to workforce reductions. Non-cash charges are expected to be $950 to $1.0 billion pre-tax and will primarily consist of incremental depreciation, asset write-offs and pension settlement and curtailment charges. Restructuring charges in 2021 are now expected to be $280 to $380 pre-tax ($225 to $300 after tax).market participants.
The followingtotal purchase price consideration was allocated to the net charges were incurred in connection with the 2018 Global Restructuring Program: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30 | | Nine Months Ended September 30 |
| 2021 | | 2020 | | 2021 | | 2020 |
Cost of products sold: | | | | | | | |
Charges (adjustments) for workforce reductions | $ | 5 | | | $ | 15 | | | $ | 3 | | | $ | 16 | |
Asset impairments | — | | | — | | | 3 | | | — | |
Asset write-offs | 14 | | | 50 | | | 15 | | | 59 | |
Incremental depreciation | 2 | | | 18 | | | 10 | | | 86 | |
Other exit costs | 27 | | | 24 | | | 67 | | | 76 | |
Total | 48 | | | 107 | | | 98 | | | 237 | |
Marketing, research and general expenses: | | | | | | | |
Charges (adjustments) for workforce reductions | 16 | | | 1 | | | 30 | | | (1) | |
Other exit costs | 23 | | | 24 | | | 48 | | | 76 | |
Total | 39 | | | 25 | | | 78 | | | 75 | |
Other (income) and expense, net | 1 | | | (1) | | | 9 | | | (1) | |
Nonoperating expense | 9 | | | 26 | | | 65 | | | 26 | |
Total charges | 97 | | | 157 | | | 250 | | | 337 | |
Provision for income taxes | (16) | | | (50) | | | (48) | | | (83) | |
Net charges | 81 | | | 107 | | | 202 | | | 254 | |
Net impact related to equity companies and noncontrolling interests | (2) | | | — | | | (3) | | | (1) | |
Net charges attributable to Kimberly-Clark Corporation | $ | 79 | | | $ | 107 | | | $ | 199 | | | $ | 253 | |
assets acquired based upon their respective estimated fair values as follows: | | | | | | | | |
| | |
| | |
| | |
Current Assets | | $ | 40 | |
Property, Plant and Equipment, Net | | 2 | |
Goodwill | | 297 | |
Other Intangible Assets, Net | | 123 | |
Other Assets | | 4 | |
Current Liabilities | | (29) | |
Deferred Income Taxes | | (18) | |
The following summarizes the restructuring liabilities activity: | | | | | | | | | | | | | | | | | 2021 | | 2020 | Restructuring liabilities at January 1 | | $ | 94 | | | $ | 132 | | Charges for workforce reductions and other cash exit costs | | 145 | | | 162 | | Cash payments | | (171) | | | (177) | | Currency and other | | (3) | | | (3) | | Restructuring liabilities at September 30 | | $ | 65 | | | $ | 114 | |
Restructuring liabilities of $48 and $80 are recorded in Accrued expenses and other current liabilities and $17 and $34 are recorded in Other Liabilities
| | (4) | |
Fair value of net assets acquired | | 415 | |
| | |
Less fair value of non-controlling interest | | (234) | |
Total purchase price consideration | | $ | 181 | |
Other Intangible Assets, Net includes brands and customer relationships which have estimated useful lives of 4 to 15 years, primarily 15 years. Based on the carrying value of these finite-lived assets as of September 30, 2021March 31, 2022, amortization expense per year for each of the next five years is estimated to be approximately $8.
Goodwill of $297 was allocated to the Personal Care business segment. The goodwill is primarily attributable to future growth opportunities and 2020, respectively. any intangible assets that did not qualify for separate recognition. For tax purposes, the acquisition of additional Thinx shares was treated as a stock acquisition, and the goodwill acquired is not tax deductible.
The impact related to restructuring charges is recorded in Operating working capitalpreliminary estimates of the fair value of identifiable assets acquired and Other Operating Activities, as appropriate, in our consolidated cash flow statements.
Through September 30, 2021, cumulative pre-tax charges for the 2018 Global Restructuring Program were $2.1 billion ($1.6 billion after tax).
Note 3. 2020 Acquisition
On October 1, 2020 (“Acquisition Date”), we acquired Softex Indonesia, in an all-cash transaction for approximately $1.2 billion. The transaction price,liabilities assumed are subject to working capital and net debtrevisions, which may result in adjustments resulted in a preliminary purchase price of $1.1 billion as of December 31, 2020 in addition to the assumption of certain indebtedness of Softex Indonesia at closing. The allocation of purchase consideration related to Softex Indonesia was substantially completed in the fourth quarter of 2020. preliminary values discussed above. We continue to evaluate potential contingencies that may have existed as of the acquisition date and expect to finalize the purchase price allocation no later than the fourthfirst quarter of 2021.2023.
As a result of this transaction during the quarter ended March 31, 2022, an $85 non-recurring, non-cash gain was recognized in Other (income) expense, net as a result of the remeasurement of the carrying value of our previously held equity investment to fair value, and related transaction and integration costs of $21 were recorded in Marketing, research and general expenses. This recognition resulted in a net benefit of $64 pre-tax ($68 after tax) being included in our consolidated income statement for the quarter ended March 31, 2022. In addition, we removed the non-cash gain impact from Operating Activities in our consolidated cash flow statements for the quarter ended March 31, 2022.
See Note 3, Acquisition, toPro forma results of operations have not been presented as the impact on our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for the preliminary purchase price allocation, valuation methodology, and other information related to the Softex Indonesia acquisition.
Note 4.3. Fair Value Information
The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:
Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
During the ninethree months ended September 30, 2021March 31, 2022 and for the full year 2020,2021, there were no significant transfers to or from level 3 fair value determinations.
Derivative assets and liabilities are measured on a recurring basis at fair value. At September 30, 2021March 31, 2022 and December 31, 2020,2021, derivative assets were $79$57 and $44,$65, respectively, and derivative liabilities were $39$85 and $92,$41, respectively. The fair values of derivatives used to manage interest rate risk and commodity price risk are based on LIBOR rates and interest rate swap curves
and NYMEX price quotations, respectively. The fair values of hedging instruments used to manage foreign currency risk are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. Measurement of our derivative assets and liabilities is considered a level 2 measurement. Additional information on our classification and use of derivative instruments is contained in Note 7.6.
Redeemable common and preferred securities of subsidiaries are measured on a recurring basis at their estimated redemption values, which approximate fair value and were $28asvalue. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the securities were valued at $260 and $26, respectively. TheyNo redeemable common securities were outstanding at December 31, 2021. The securities are not traded in active markets. The fair values of the redeemable securities were based on a discounted cash flow valuation model. Measurement of the redeemable preferred securitiesmarkets, and their measurement is considered a level 3 measurement.
Company-owned life insurance ("COLI") assets are measured on a recurring basis at fair value. COLI assets were $73$69 and $72 at September 30, 2021 March 31, 2022 and December 31, 2020,2021, respectively. The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in Other Assets. The COLI policies are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.
The following table includes the fair value of our financial instruments for which disclosure of fair value is required:
| | | Fair Value Hierarchy Level | | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value | | Fair Value Hierarchy Level | | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Assets | Assets | | | | | | Assets | | | | | |
Cash and cash equivalents(a) | Cash and cash equivalents(a) | 1 | | $ | 286 | | | $ | 286 | | | $ | 303 | | | $ | 303 | | Cash and cash equivalents(a) | 1 | | $ | 493 | | | $ | 493 | | | $ | 270 | | | $ | 270 | |
Time deposits(b) | Time deposits(b) | 1 | | 368 | | | 368 | | | 364 | | | 364 | | Time deposits(b) | 1 | | 239 | | | 239 | | | 416 | | | 416 | |
| Liabilities | Liabilities | | Liabilities | |
Short-term debt(c) | Short-term debt(c) | 2 | | 1,072 | | | 1,072 | | | 223 | | | 223 | | Short-term debt(c) | 2 | | 955 | | | 955 | | | 118 | | | 118 | |
| Long-term debt(d) | Long-term debt(d) | 2 | | 7,870 | | | 8,968 | | | 8,141 | | | 9,627 | | Long-term debt(d) | 2 | | 8,115 | | | 8,439 | | | 8,456 | | | 9,492 | |
(a)Cash equivalents are composed of certificates of deposit, time deposits and other interest-bearing investments with original maturity dates of 90 days or less. Cash equivalents are recorded at cost, which approximates fair value.
(b)Time deposits are composed of deposits with original maturities of more than 90 days but less than one year and instruments with original maturities of greater than one year, included in Other current assets or Other Assets in the consolidated balance sheet, as appropriate. Time deposits are recorded at cost, which approximates fair value.
(c)Short-term debt is composed of U.S. commercial paper and/or other similar short-term debt issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(d)Long-term debt includes the current portion of these debt instruments. Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.
Note 5.4. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
| | | Three Months Ended September 30 | | Nine Months Ended September 30 | | Three Months Ended March 31 | |
(Millions of shares) | (Millions of shares) | | 2021 | | 2020 | | 2021 | | 2020 | (Millions of shares) | | 2022 | | 2021 | |
Basic | Basic | | 336.8 | | | 341.0 | | | 337.4 | | | 341.1 | | Basic | | 337.0 | | | 338.2 | | |
Dilutive effect of stock options and restricted share unit awards | Dilutive effect of stock options and restricted share unit awards | | 0.7 | | | 1.3 | | | 1.0 | | | 1.2 | | Dilutive effect of stock options and restricted share unit awards | | 1.2 | | | 1.2 | | |
Diluted | Diluted | | 337.5 | | | 342.3 | | | 338.4 | | | 342.3 | | Diluted | | 338.2 | | | 339.4 | | |
The impact of options outstanding that were not included in the computation of diluted EPS because their exercise price was greater than the average market price of the common shares was insignificant. The number of common shares outstanding as of September 30,March 31, 2022 and 2021 was 337.0 million and 2020 was 336.7 million and 340.4337.6 million, respectively.
Note 6.5. Stockholders' Equity
Net unrealized currency gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are recorded in Accumulated Other Comprehensive Income ("AOCI"). For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in AOCI rather than net income. Upon sale or substantially complete liquidation of any of these subsidiaries, the
applicable unrealized translation would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation.
Also included in unrealized translation amounts are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.
The change in net unrealized currency translation for the ninethree months ended September 30, 2021March 31, 2022 was primarily due to the weakeningstrengthening of certain foreign currencies versus the U.S. dollar, particularly the Korean won, the euro, the Australian dollar and the Peruvian sol.Brazilian real.
The changes in the components of AOCI attributable to Kimberly-Clark, net of tax, are as follows: | | Unrealized Translation | | Defined Benefit Pension Plans | | Other Postretirement Benefit Plans | | Cash Flow Hedges and Other | |
Balance as of December 31, 2019 | | $ | (2,271) | | | $ | (979) | | | $ | (13) | | | $ | (31) | | |
Other comprehensive income (loss) before reclassifications | | (233) | | | (19) | | | 3 | | | 15 | | |
(Income) loss reclassified from AOCI | | — | | | 57 | | (a) | (1) | | (a) | (10) | | |
Net current period other comprehensive income (loss) | | (233) | | | 38 | | | 2 | | | 5 | | |
| Balance as of September 30, 2020 | | $ | (2,504) | | | $ | (941) | | | $ | (11) | | | $ | (26) | | |
| | | | | | | | | | Unrealized Translation | | Defined Benefit Pension Plans | | Other Postretirement Benefit Plans | | Cash Flow Hedges and Other |
Balance as of December 31, 2020 | Balance as of December 31, 2020 | | $ | (2,157) | | | $ | (912) | | | $ | (40) | | | $ | (63) | | Balance as of December 31, 2020 | | $ | (2,157) | | | $ | (912) | | | $ | (40) | | | $ | (63) | |
Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | | (266) | | | 5 | | | (12) | | | 56 | | Other comprehensive income (loss) before reclassifications | | (205) | | | — | | | 2 | | | 22 | |
(Income) loss reclassified from AOCI | (Income) loss reclassified from AOCI | | — | | | 52 | | (a) | (3) | | (a) | 35 | | (Income) loss reclassified from AOCI | | — | | | 14 | | (a) | — | | (a) | 12 | |
Net current period other comprehensive income (loss) | Net current period other comprehensive income (loss) | | (266) | | | 57 | | | (15) | | | 91 | | Net current period other comprehensive income (loss) | | (205) | | | 14 | | | 2 | | | 34 | |
| Balance as of September 30, 2021 | | $ | (2,423) | | | $ | (855) | | | $ | (55) | | | $ | 28 | | |
Balance as of March 31, 2021 | | Balance as of March 31, 2021 | | $ | (2,362) | | | $ | (898) | | | $ | (38) | | | $ | (29) | |
| Balance as of December 31, 2021 | | Balance as of December 31, 2021 | | $ | (2,422) | | | $ | (803) | | | $ | (34) | | | $ | 20 | |
Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | | 57 | | | 7 | | | (2) | | | (2) | |
(Income) loss reclassified from AOCI | | (Income) loss reclassified from AOCI | | — | | | 6 | | (a) | — | | (a) | (7) | |
Net current period other comprehensive income (loss) | | Net current period other comprehensive income (loss) | | 57 | | | 13 | | | (2) | | | (9) | |
| Balance as of March 31, 2022 | | Balance as of March 31, 2022 | | $ | (2,365) | | | $ | (790) | | | $ | (36) | | | $ | 11 | |
(a) Included in computation of net periodic benefit costs.
Note 7.6. Objectives and Strategies for Using Derivatives
As a multinational enterprise, we are exposed to financial risks, such as changes in foreign currency exchange rates, interest rates,rates, and commodity prices. We employ a number of practices to manage these risks, including operating and financing activities and, where appropriate, the use of derivative instruments.
At September 30, 2021March 31, 2022 and December 31, 2020,2021, derivative assets were $79$57 and $44,$65, respectively, and derivative liabilities were $39$85 and $92,$41, respectively, primarily comprised of foreign currency exchange contracts. Derivative assets are recorded in Other current assets or Other Assets, as appropriate, and derivative liabilities are recorded in Accrued expenses and other current liabilities or Other Liabilities, as appropriate.
Foreign Currency Exchange Rate Risk
Translation adjustments result from translating foreign entities' financial statements into U.S. dollars from their functional currencies. The risk to any particular entity's net assets is reduced to the extent that the entity is financed with local currency borrowings. A portion of our balance sheet translation exposure for certain affiliates, which results from changes in translation rates between the affiliates’ functional currencies and the U.S. dollar, is hedged with cross-currency swap contracts and certain foreign denominated debt which are designated as net investment hedges. The foreign currency exposure on certain non-functional currency denominated monetary assets and liabilities, primarily intercompany loans and accounts payable, is hedged with primarily undesignated derivative instruments.
Derivative instruments are entered into to hedge a portion of forecasted cash flows denominated in foreign currencies for non-U.S. operations' purchases of raw materials, which are priced in U.S. dollars, and imports of intercompany finished goods and work-in-process priced predominantly in U.S. dollars and euros. The derivative instruments used to manage these exposures are designated as cash flow hedges.
Interest Rate Risk
Interest rate risk is managed using a portfolio of variable and fixed-rate debt composed of short and long-term instruments. Interest rate swap contracts may be used to facilitate the maintenance of the desired ratio of variable and fixed-rate debt and are designated as fair value hedges. From time to time, we also hedge the anticipated issuance of fixed-rate debt, and these contracts are designated as cash flow hedges.
Commodity Price Risk
We use derivative instruments, such as forward contracts, to hedge a limited portion of our exposure to market risk arising from changes in prices of certain commodities. These derivatives are designated as cash flow hedges of specific quantities of the underlying commodity expected to be purchased in future months. In addition, we utilize negotiated short-term contract structures, including fixed price contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs.
Fair Value Hedges
Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk. The fair values of these interest rate derivative instruments are recorded as an asset or liability, as appropriate, with the offset recorded in Interest expense. The offset to the change in fair values of the related debt is also recorded in Interest expense. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to Interest expense over the life of the related debt. As of September 30, 2021,March 31, 2022, the aggregate notional values and carrying values of debt subject to outstanding interest rate contracts designated as fair value hedges were $625$525 and $638,$501, respectively. For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, gains or losses recognized in Interest expense for interest rate swaps were not significant.
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is initially recorded in AOCI, net of related income taxes, and recognized in earnings in the same income statement line and period that the hedged exposure affects earnings. As of September 30, 2021,March 31, 2022, outstanding commodity forward contracts were in place to hedge a limited portion of our estimated requirements of the related underlying commodities in the remainder of 20212022 and future periods. As of September 30, 2021,March 31, 2022, the aggregate notional value of outstanding foreign exchange derivative contracts designated as cash flow hedges was $709.$781. For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, no significant gains or losses were reclassified into Interest expense, Cost of products sold or Other (income) and expense, net as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At September 30, 2021,March 31, 2022, amounts to be reclassified from AOCI into Interest expense, Cost of products sold or Other (income) and expense, net during the next twelve months are not expected to be material. The maximum maturity of cash flow hedges in place at September 30, 2021March 31, 2022 is September 2023.December 2024.
Net Investment Hedges
For derivative instruments that are designated and qualify as net investment hedges, the aggregate notional value was $1.5$1.4 billion at September 30, 2021.March 31, 2022. We exclude the interest accruals on cross-currency swap contracts and the forward points on foreign exchange forward contracts from the assessment and measurement of hedge effectiveness. We recognize the interest accruals on cross-currency swap contracts in earnings within Interest expense. We amortize the forward points on foreign exchange contracts into earnings within Interest expense over the life of the hedging relationship. Changes in fair value of net
investment hedges are recorded in AOCI and offset the change in the value of the net investment being hedged. For the ninethree months ended September 30, 2021,March 31, 2022, unrealized gains of $69$9 related to net investment hedge fair value changes were recorded in AOCI and no significant amounts were reclassified from AOCI to Interest expense.
No significant amounts were excluded from the assessment of net investment, fair value or cash flow hedge effectiveness as of September 30, 2021.March 31, 2022.
Undesignated Hedging Instruments
Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in Other (income) and expense, net. A loss of $2$34 and a gainloss of $23$9 were recorded in the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. A loss of $8 and a gain of $31 were recorded in the nine months ended September 30, 2021 and 2020. The effect on earnings from the use of these non-designated derivatives is substantially neutralized by the transactional gains and losses recorded on the underlying assets and liabilities. At September 30, 2021,March 31, 2022, the notional value of these undesignated derivative instruments was approximately $2.1 billion.$2.2 billion.
Note 8.7. Business Segment Information
We are organized into operating segments based on product groupings. These operating segments have been aggregated into three reportable global business segments: Personal Care, Consumer Tissue and K-C Professional. The reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes Other (income) and expense, net and income and expense not associated with ongoing
operations of the business segments, including the costs of corporate decisions related to the 2018 Global Restructuring Program describedwhich was completed in Note 2.2021.
The principal sources of revenue in each global business segment are described below:
•Personal Care brands offer our consumers a trusted partner in caring for themselves and their families by delivering confidence, protection and discretion through a wide variety of innovative solutions and products such as disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and other related products. Products in this segment are sold under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise and other brand names.
•Consumer Tissue offers a wide variety of innovative solutions and trusted brands that responsibly improve everyday living for families around the world. Products in this segment include facial and bathroom tissue, paper towels, napkins and related products, and are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve and other brand names.
•K-C Professional partners with businesses to create Exceptional Workplaces, helping to make them healthier, safer and more productive through a range of solutions and supporting products such as wipers, tissue, towels, apparel, soaps and sanitizers. Our brands, including Kleenex, Scott, WypAll, Kimtech and KleenGuard are well known for quality and trusted to help people around the world work better.
Information concerning consolidated operations by business segment is presented in the following tables:
| | | Three Months Ended September 30 | | Nine Months Ended September 30 | | | Three Months Ended March 31 | | |
| | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | 2022 | | 2021 | | Change | |
NET SALES | NET SALES | | | | | | | | | | | | | NET SALES | | | | | | | |
Personal Care | Personal Care | | $ | 2,656 | | | $ | 2,339 | | | +14 | % | | $ | 7,635 | | | $ | 6,990 | | | +9 | % | Personal Care | | $ | 2,729 | | | $ | 2,462 | | | +11 | % | |
Consumer Tissue | Consumer Tissue | | 1,541 | | | 1,623 | | | -5 | % | | 4,475 | | | 4,991 | | | -10 | % | Consumer Tissue | | 1,568 | | | 1,510 | | | +4 | % | |
K-C Professional | K-C Professional | | 797 | | | 705 | | | +13 | % | | 2,314 | | | 2,277 | | | +2 | % | K-C Professional | | 780 | | | 752 | | | +4 | % | |
Corporate & Other | Corporate & Other | | 16 | | | 16 | | | N.M. | | 51 | | | 46 | | | N.M. | Corporate & Other | | 18 | | | 19 | | | N.M. | |
TOTAL NET SALES | TOTAL NET SALES | | $ | 5,010 | | | $ | 4,683 | | | +7 | % | | $ | 14,475 | | | $ | 14,304 | | | +1 | % | TOTAL NET SALES | | $ | 5,095 | | | $ | 4,743 | | | +7 | % | |
| OPERATING PROFIT | OPERATING PROFIT | | OPERATING PROFIT | | |
Personal Care | Personal Care | | $ | 496 | | | $ | 486 | | | +2 | % | | $ | 1,431 | | | $ | 1,532 | | | -7 | % | Personal Care | | $ | 475 | | | $ | 481 | | | -1 | % | |
Consumer Tissue | Consumer Tissue | | 222 | | | 318 | | | -30 | % | | 687 | | | 1,111 | | | -38 | % | Consumer Tissue | | 171 | | | 269 | | | -36 | % | |
K-C Professional | K-C Professional | | 96 | | | 87 | | | +10 | % | | 332 | | | 423 | | | -22 | % | K-C Professional | | 90 | | | 126 | | | -29 | % | |
Corporate & Other(a) | Corporate & Other(a) | | (150) | | | (220) | | | N.M. | | (386) | | | (544) | | | N.M. | Corporate & Other(a) | | (102) | | | (102) | | | N.M. | |
Other (income) and expense, net(a) | Other (income) and expense, net(a) | | 7 | | | 5 | | | +40 | % | | 24 | | | 27 | | | -11 | % | Other (income) and expense, net(a) | | (59) | | | 4 | | | N.M. | |
TOTAL OPERATING PROFIT | TOTAL OPERATING PROFIT | | $ | 657 | | | $ | 666 | | | -1 | % | | $ | 2,040 | | | $ | 2,495 | | | -18 | % | TOTAL OPERATING PROFIT | | $ | 693 | | | $ | 770 | | | -10 | % | |
(a) Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including the non-cash, non-recurring gain and transaction and integration costs related to the acquisition of a controlling interest in Thinx in 2022 and charges related to the 2018 Global Restructuring Program and Softex Indonesia acquisition-related costs. in 2021. Restructuring charges related to the Personal Care, Consumer Tissue and K-C Professional business segments were $32, $42 and $10, respectively, for the three months ended September 30,March 31, 2021 $57, $59,were, $15, $16, and $15, respectively, for the three months ended September 30, 2020, $71, $84 and $19, respectively, for the nine months ended September 30, 2021, and $131, $135 and $41, respectively for the nine months ended September 30, 2020 .$3, respectively.
N.M. - Not Meaningful
Sales of Principal Products:
| | | Three Months Ended September 30 | | Nine Months Ended September 30 | | Three Months Ended March 31 | |
(Billions of dollars) | (Billions of dollars) | | 2021 | | 2020 | | 2021 | | 2020 | (Billions of dollars) | | 2022 | | 2021 | |
Baby and child care products | Baby and child care products | | 1.8 | | | 1.6 | | | 5.3 | | | 4.8 | | Baby and child care products | | $ | 1.9 | | | $ | 1.7 | | |
Consumer tissue products | Consumer tissue products | | 1.5 | | | 1.6 | | | 4.5 | | | 5.0 | | Consumer tissue products | | 1.6 | | | 1.5 | | |
Away-from-home professional products | Away-from-home professional products | | 0.8 | | | 0.7 | | | 2.3 | | | 2.3 | | Away-from-home professional products | | 0.8 | | | 0.8 | | |
All other | All other | | 0.9 | | | 0.8 | | | 2.4 | | | 2.2 | | All other | | 0.8 | | | 0.7 | | |
Consolidated | Consolidated | | $ | 5.0 | | | $ | 4.7 | | | $ | 14.5 | | | $ | 14.3 | | Consolidated | | $ | 5.1 | | | $ | 4.7 | | |
Note 9.8. Supplemental Balance Sheet Data
The following schedule presents a summary of inventories by major class: | | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | LIFO | | Non-LIFO | | Total | | LIFO | | Non-LIFO | | Total | | LIFO | | Non-LIFO | | Total | | LIFO | | Non-LIFO | | Total |
Raw materials | Raw materials | | $ | 141 | | | $ | 342 | | | $ | 483 | | | $ | 131 | | | $ | 263 | | | $ | 394 | | Raw materials | | $ | 152 | | | $ | 362 | | | $ | 514 | | | $ | 141 | | | $ | 352 | | | $ | 493 | |
Work in process | Work in process | | 143 | | | 91 | | | 234 | | | 103 | | | 86 | | | 189 | | Work in process | | 153 | | | 96 | | | 249 | | | 153 | | | 89 | | | 242 | |
Finished goods | Finished goods | | 545 | | | 776 | | | 1,321 | | | 453 | | | 749 | | | 1,202 | | Finished goods | | 621 | | | 817 | | | 1,438 | | | 607 | | | 835 | | | 1,442 | |
Supplies and other | Supplies and other | | — | | | 276 | | | 276 | | | — | | | 263 | | | 263 | | Supplies and other | | — | | | 290 | | | 290 | | | — | | | 280 | | | 280 | |
| | 829 | | | 1,485 | | | 2,314 | | | 687 | | | 1,361 | | | 2,048 | | | 926 | | | 1,565 | | | 2,491 | | | 901 | | | 1,556 | | | 2,457 | |
Excess of FIFO or weighted-average cost over LIFO cost | Excess of FIFO or weighted-average cost over LIFO cost | | (216) | | | — | | | (216) | | | (145) | | | — | | | (145) | | Excess of FIFO or weighted-average cost over LIFO cost | | (226) | | | — | | | (226) | | | (218) | | | — | | | (218) | |
Total | Total | | $ | 613 | | | $ | 1,485 | | | $ | 2,098 | | | $ | 542 | | | $ | 1,361 | | | $ | 1,903 | | Total | | $ | 700 | | | $ | 1,565 | | | $ | 2,265 | | | $ | 683 | | | $ | 1,556 | | | $ | 2,239 | |
Inventories are valued at the lower of cost or net realizable value, determined on the FIFO or weighted-average cost methods, and at the lower of cost or market, determined on the LIFO cost method.
The following schedule presents a summary of property, plant and equipment, net: | | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Land | Land | $ | 169 | | | $ | 174 | | Land | $ | 168 | | | $ | 169 | |
Buildings | Buildings | 2,959 | | | 2,932 | | Buildings | 3,026 | | | 2,993 | |
Machinery and equipment | Machinery and equipment | 14,514 | | | 14,382 | | Machinery and equipment | 14,745 | | | 14,606 | |
Construction in progress | Construction in progress | 700 | | | 845 | | Construction in progress | 766 | | | 760 | |
| | 18,342 | | | 18,333 | | | 18,705 | | | 18,528 | |
Less accumulated depreciation | Less accumulated depreciation | (10,378) | | | (10,291) | | Less accumulated depreciation | (10,591) | | | (10,431) | |
Total | Total | $ | 7,964 | | | $ | 8,042 | | Total | $ | 8,114 | | | $ | 8,097 | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
This management's discussion and analysis ("MD&A") of financial condition and results of operations is intended to provide investors with an understanding of our recent performance, financial condition and prospects. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted. The following will be discussed and analyzed:
•Overview of ThirdFirst Quarter 20212022 Results
•Impact of COVID-19
•Results of Operations and Related Information
•Liquidity and Capital Resources
•Information Concerning Forward-Looking Statements
We describe our business outside North America in two groups – Developing and Emerging Markets ("D&E") and Developed Markets. D&E markets comprise Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Developed Markets consist of Western and Central Europe, Australia and South Korea. We have three reportable business segments: Personal Care, Consumer Tissue and K-C Professional. These business segments are described in greater detail in Note 87 to the unaudited interim consolidated financial statements.
On February 24, 2022, we completed our acquisition of a majority and controlling share of Thinx Inc. (“Thinx”), an industry leader in the reusable period and incontinence underwear category, for total consideration of $181 consisting of cash of $53, the fair value of our previously held equity investment of $127, and certain share-based award costs of $1.
This section presents a discussion and analysis of our thirdfirst quarter 20212022 net sales, operating profit and other information relevant to an understanding of the results of operations. In addition, we provide commentary regarding organic sales growth, which describes the impact of changes in volume, net selling prices and product mix on net sales. Change in foreign currency exchange rates acquisitions and exited businesses also impact the year-over-year change in net sales. Our analysis compares the three and nine months ended September 30, 2021March 31, 2022 results to the same periodsperiod in 2020.2021.
In March 2022, we implemented significant adjustments to our business in Russia and suspended all media, advertising and promotional activity as well as capital investments in our sole manufacturing facility. Consistent with the humanitarian nature of our products, we are producing only essential items, specifically baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies, but our ability to provide these items may change as the situation evolves. Our Russia business has historically represented approximately 1 to 2 percent of our net sales, operating profit and total assets. We are actively monitoring the situation, and as the business, geopolitical and regulatory environment concerning Russia evolves, our assets may be partially or fully impaired. For a more complete discussion of the risks we encounter in our business, please refer to Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.
Throughout this MD&A, we refer to financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures. These measures include adjusted gross and operating profit, adjusted net income, adjusted earnings per share, adjusted other (income) and expense, net and adjusted effective tax rate. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight into some of the financial measures used to evaluate management.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, and they should be read only in conjunction with our unaudited interim consolidated financial statements prepared in accordance with GAAP. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items being excluded. We compensate for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures.
The non-GAAP financial measures exclude the following itemsitem for the relevant time periodsperiod as indicated in the reconciliations included later in this MD&A:
•Acquisition of controlling interest in Thinx – In the first quarter of 2022, we increased our investment in Thinx. As a result of this transaction, a net benefit was recognized of $64 pre-tax ($68 after tax), primarily due to the non-recurring, non-cash gain recognized related to the remeasurement of the carrying value of our previously held equity investment to fair value partially offset by transaction and integration costs. See Item 1, Note 2 to the unaudited interim consolidated financial statements for details.
The non-GAAP financial measures also exclude charges in 2021 for the 2018 Global Restructuring Program –as indicated in the reconciliations included later in this MD&A. In 2018, we initiated this restructuring programin order to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. See Item 1, Note 2 to the unaudited interim consolidated financial statementsAs a result, we recognized restructuring charges in 2018, 2019, 2020 and 2021 for details.
•Acquisition-Related Costs – In the third quarter of 2020, we incurred one-time transaction and integration costs associated with the acquisition of Softex Indonesia. See Item 1, Note 3 to the unaudited interim consolidated financial statements for details.this program. Restructuring actions were completed in 2021.
Overview of ThirdFirst Quarter 20212022 Results
•Net sales of $5.0$5.1 billion increased 7 percent compared to the year-ago period, including an organic sales increasegrowth of 410 percent.
•Operating profit was $657$693 in 20212022 and $666$770 in 2020.2021. Net Income Attributable to Kimberly-Clark Corporation was $469$523 in 20212022 compared to $472$584 in 2020,2021, and diluted earnings per share were $1.39$1.55 in 20212022 compared to $1.38$1.72 in 2020.2021. Results in 2022 include the net benefit of the acquisition of a controlling interest of Thinx, compared to 2021 and 2020results, which include charges related to the 2018 Global Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia.Program.
Impact of COVID-19
We continue to actively address the COVID-19 situation and its impact globally. We believe that we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and severity of this global pandemic or its ultimate impact on the global economy and our business and results.
We have experienced increased volatility in demand for some of our products as consumers adapt to the evolving environment. Throughout 2020, we experienced a high level of demand in our Consumer Tissue business segment across several major geographies, particularly the U.S., as consumers increased home inventory levels in response to COVID-19. The demand increase was followed by a period of demand softness in the first nine months of 2021 as consumers used existing home inventories and retailers lowered their inventory levels. Our K-C Professional business experienced volume declines during 2020 and the first six months of 2021 reflecting the reduction in away from home demand, particularly for our washroom tissue products.
During 2020 and the first nine months of 2021, we experienced temporary closures of certain facilities and reductions in capacity related to COVID-19. We continue to experience ongoing incidents of supply chain disruption related to the continuing impact of COVID-19 on employees, labor shortages, raw material supply and transportation challenges, particularly in markets where COVID-19 case levels are elevated.
During 2020 and the first nine months of 2021, we also experienced increased volatility in foreign currency exchange rates and commodity prices. The global pandemic disrupted supply and demand dynamics in commodity markets. In 2020, we experienced modest commodity deflation and in the first nine months of 2021, we experienced record levels of commodity inflation.
Results of Operations and Related Information
This section presents a discussion and analysis of our thirdfirst quarter 20212022 net sales, operating profit and other information relevant to an understanding of the results of operations.
Consolidated | Selected Financial Results | Selected Financial Results | Three Months Ended September 30 | | Nine Months Ended September 30 | Selected Financial Results | Three Months Ended March 31 | |
| | 2021 | | 2020 | | Percent Change | | 2021 | | 2020 | | Percent Change | | 2022 | | 2021 | | Percent Change | |
Net Sales: | Net Sales: | | | | | | | | | | | | Net Sales: | | | | | | |
North America | North America | $ | 2,692 | | | $ | 2,562 | | | +5 | % | | $ | 7,436 | | | $ | 7,786 | | | -4 | % | North America | $ | 2,614 | | | $ | 2,351 | | | +11 | % | |
Outside North America | Outside North America | 2,399 | | | 2,188 | | | +10 | % | | 7,274 | | | 6,724 | | | +8 | % | Outside North America | 2,546 | | | 2,470 | | | +3 | % | |
Intergeographic sales | Intergeographic sales | (81) | | | (67) | | | +21 | % | | (235) | | | (206) | | | +14 | % | Intergeographic sales | (65) | | | (78) | | | -17 | % | |
Total Net Sales | Total Net Sales | 5,010 | | | 4,683 | | | +7 | % | | 14,475 | | | 14,304 | | | +1 | % | Total Net Sales | 5,095 | | | 4,743 | | | +7 | % | |
Operating Profit: | Operating Profit: | | | | | | | | | Operating Profit: | | | | | |
North America | North America | 564 | | | 626 | | | -10 | % | | 1,561 | | | 2,054 | | | -24 | % | North America | 459 | | | 508 | | | -10 | % | |
Outside North America | Outside North America | 250 | | | 265 | | | -6 | % | | 889 | | | 1,012 | | | -12 | % | Outside North America | 277 | | | 367 | | | -25 | % | |
Corporate & Other(a) | Corporate & Other(a) | (150) | | | (220) | | | N.M. | | (386) | | | (544) | | | N.M. | Corporate & Other(a) | (102) | | | (101) | | | N.M. | |
Other (income) and expense, net(a) | Other (income) and expense, net(a) | 7 | | | 5 | | | +40 | % | | 24 | | | 27 | | | -11 | % | Other (income) and expense, net(a) | (59) | | | 4 | | | N.M. | |
Total Operating Profit | Total Operating Profit | 657 | | | 666 | | | -1 | % | | 2,040 | | | 2,495 | | | -18 | % | Total Operating Profit | 693 | | | 770 | | | -10 | % | |
| Share of net income of equity companies | Share of net income of equity companies | 21 | | | 31 | | | -32 | % | | 88 | | | 104 | | | -15 | % | Share of net income of equity companies | 23 | | | 39 | | | -41 | % | |
| Net Income Attributable to Kimberly-Clark Corporation | Net Income Attributable to Kimberly-Clark Corporation | 469 | | | 472 | | | -1 | % | | 1,457 | | | 1,813 | | | -20 | % | Net Income Attributable to Kimberly-Clark Corporation | 523 | | | 584 | | | -10 | % | |
Diluted Earnings per Share | Diluted Earnings per Share | 1.39 | | | 1.38 | | | +1 | % | | 4.31 | | | 5.30 | | | -19 | % | Diluted Earnings per Share | 1.55 | | | 1.72 | | | -10 | % | |
(a) Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations.
N.M. - Not Meaningful
GAAP to Non-GAAP Reconciliations of Selected Financial Results | | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2022 |
| | As Reported | | 2018 Global Restructuring Program | | | As Adjusted Non-GAAP | | As Reported | | Acquisition of Controlling Interest in Thinx | | | As Adjusted Non-GAAP |
Cost of products sold | | $ | 3,527 | | | $ | 48 | | | | $ | 3,479 | | |
Gross Profit | | 1,483 | | | (48) | | | | 1,531 | | |
| Marketing, research and general expenses | Marketing, research and general expenses | | 819 | | | 39 | | | | 780 | | Marketing, research and general expenses | | $ | 886 | | | $ | 21 | | | | $ | 865 | |
Other (income) and expense, net | Other (income) and expense, net | | 7 | | | 1 | | | | 6 | | Other (income) and expense, net | | (59) | | | (85) | | | | 26 | |
Operating Profit | Operating Profit | | 657 | | | (88) | | | | 745 | | Operating Profit | | 693 | | | 64 | | | | 629 | |
Nonoperating expense | | (10) | | | (9) | | | | (1) | | |
| Provision for income taxes | Provision for income taxes | | (126) | | | 16 | | | | (142) | | Provision for income taxes | | (114) | | | 4 | | | | (118) | |
Effective tax rate | Effective tax rate | | 21.6 | % | | — | | | 20.9 | % | Effective tax rate | | 18.2 | % | | — | | | 21.0 | % |
| Net income attributable to noncontrolling interests | | (10) | | | 2 | | | | (12) | | |
| Net Income Attributable to Kimberly-Clark Corporation | Net Income Attributable to Kimberly-Clark Corporation | | 469 | | | (79) | | | | 548 | | Net Income Attributable to Kimberly-Clark Corporation | | 523 | | | 68 | | | | 455 | |
Diluted Earnings per Share(a) | Diluted Earnings per Share(a) | | 1.39 | | | (0.23) | | | | 1.62 | | Diluted Earnings per Share(a) | | 1.55 | | | 0.20 | | | | 1.35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2020 |
| | As Reported | | 2018 Global Restructuring Program | | Softex Indonesia Acquisition-Related Costs | | As Adjusted Non-GAAP |
Cost of products sold | | $ | 3,093 | | | $ | 107 | | | $ | — | | | $ | 2,986 | |
Gross Profit | | 1,590 | | | (107) | | | — | | | 1,697 | |
Marketing, research and general expenses | | 919 | | | 25 | | | 9 | | | 885 | |
Other (income) and expense, net | | 5 | | | (1) | | | — | | | 6 | |
Operating Profit | | 666 | | | (131) | | | (9) | | | 806 | |
Nonoperating expense | | (40) | | | (26) | | | — | | | (14) | |
Provision for income taxes | | (114) | | | 50 | | | — | | | (164) | |
Effective tax rate | | 20.1 | % | | — | | — | | 22.4 | % |
| | | | | | | | |
| | | | | | | | |
Net Income Attributable to Kimberly-Clark Corporation | | 472 | | | (107) | | | (9) | | | 588 | |
Diluted Earnings per Share(a) | | 1.38 | | | (0.31) | | | (0.03) | | | 1.72 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2021 |
| | As Reported | | 2018 Global Restructuring Program | | | | As Adjusted Non-GAAP |
Cost of products sold | | $ | 9,923 | | | $ | 98 | | | | | $ | 9,825 | |
Gross Profit | | 4,552 | | | (98) | | | | | 4,650 | |
Marketing, research and general expenses | | 2,488 | | | 78 | | | | | 2,410 | |
Other (income) and expense, net | | 24 | | | 9 | | | | | 15 | |
Operating Profit | | 2,040 | | | (185) | | | | | 2,225 | |
Nonoperating expense | | (71) | | | (65) | | | | | (6) | |
Provision for income taxes | | (386) | | | 48 | | | | | (434) | |
Effective tax rate | | 21.7 | % | | — | | | | 21.4 | % |
| | | | | | | | |
Net income attributable to noncontrolling interests | | (26) | | | 3 | | | | | (29) | |
Net Income Attributable to Kimberly-Clark Corporation | | 1,457 | | | (199) | | | | | 1,656 | |
Diluted Earnings per Share(a) | | 4.31 | | | (0.59) | | | | | 4.89 | |
| | | Nine Months Ended September 30, 2020 | | Three Months Ended March 31, 2021 |
| | As Reported | | 2018 Global Restructuring Program | | Softex Indonesia Acquisition-Related Costs | | As Adjusted Non-GAAP | | As Reported | | 2018 Global Restructuring Program | | | As Adjusted Non-GAAP |
Cost of products sold | Cost of products sold | | $ | 9,146 | | | $ | 237 | | | $ | — | | | $ | 8,909 | | Cost of products sold | | $ | 3,154 | | | $ | 25 | | | | $ | 3,129 | |
Gross Profit | Gross Profit | | 5,158 | | | (237) | | | — | | | 5,395 | | Gross Profit | | 1,589 | | | (25) | | | | 1,614 | |
Marketing, research and general expenses | Marketing, research and general expenses | | 2,636 | | | 75 | | | 9 | | | 2,552 | | Marketing, research and general expenses | | 815 | | | 9 | | | | 806 | |
Other (income) and expense, net | | 27 | | | (1) | | | — | | | 28 | | |
| Operating Profit | Operating Profit | | 2,495 | | | (311) | | | (9) | | | 2,815 | | Operating Profit | | 770 | | | (34) | | | | 804 | |
Nonoperating expense | | (57) | | | (26) | | | — | | | (31) | | |
| Provision for income taxes | Provision for income taxes | | (510) | | | 83 | | | — | | | (593) | | Provision for income taxes | | (147) | | | 7 | | | | (154) | |
Effective tax rate | Effective tax rate | | 22.6 | % | | — | | — | | 22.8 | % | Effective tax rate | | 20.9 | % | | — | | | 20.9 | % |
Share of net income of equity companies | | 104 | | | (1) | | | — | | | 105 | | |
| Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | | (37) | | | 2 | | | — | | | (39) | | Net income attributable to noncontrolling interests | | (10) | | | 1 | | | | (11) | |
Net Income Attributable to Kimberly-Clark Corporation | Net Income Attributable to Kimberly-Clark Corporation | | 1,813 | | | (253) | | | (9) | | | 2,075 | | Net Income Attributable to Kimberly-Clark Corporation | | 584 | | | (26) | | | | 610 | |
Diluted Earnings per Share(a) | Diluted Earnings per Share(a) | | 5.30 | | | (0.74) | | | (0.03) | | | 6.06 | | Diluted Earnings per Share(a) | | 1.72 | | | (0.08) | | | | 1.80 | |
(a) "As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding.
Analysis of Consolidated Results | Net Sales | Net Sales | | Percent Change | | Adjusted Operating Profit | | Percent Change | Net Sales | | Percent Change for Three Months Ended March 31, 2022 | | | Adjusted Operating Profit | | Percent Change for Three Months Ended March 31, 2022 | |
| | Three Months Ended September 30 | | Nine Months Ended September 30 | | | | Three Months Ended September 30 | | Nine Months Ended September 30 | |
Volume | Volume | | — | | | (5) | | | Volume | | (3) | | | (14) | | Volume | | 2 | | | | Volume | | (2) | | |
Net Price | Net Price | | 3 | | | 2 | | | Net Price | | 20 | | | 9 | | Net Price | | 6 | | | | Net Price | | 37 | | |
Mix/Other | Mix/Other | | 1 | | | 1 | | | Input Costs | | (59) | | | (34) | | Mix/Other | | 2 | | | | Input Costs | | (58) | | |
Acquisition/Exited Businesses(e) | | 2 | | | 2 | | | Cost Savings(c) | | 18 | | | 14 | | |
Currency | Currency | | 1 | | | 2 | | | Currency Translation | | 1 | | | 2 | | Currency | | (2) | | | | Cost Savings(c) | | 6 | | |
Total(a) | Total(a) | | 7 | | | 1 | | | Other(d) | | 15 | | | 2 | | Total(a) | | 7 | | | | Currency Translation | | (2) | | |
| | | | | | Other(d) | | (3) | | |
Organic(b) | Organic(b) | | 4 | | | (2) | | | Total | | (8) | | | (21) | | Organic(b) | | 10 | | | | Total | | (22) | | |
(a) Total may not equal the sum of volume, net price, mix/other acquisition/exited businesses and currency due to rounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Combined benefitsBenefits of the FORCE (Focused On Reducing Costs Everywhere) program and 2018 Global Restructuring Program.program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
(e) Combined impact of the acquisition of Softex Indonesia and exited businesses in conjunction with the 2018 Global Restructuring Program.
Net sales in the thirdfirst quarter of $5.0$5.1 billion increased 7 percent versuscompared to the prior year.year-ago period. Changes in foreign currency exchange rates increased sales by 1 percent, and the net impact of the Softex Indonesia acquisition and exited businesses in conjunction with the 2018 Global Restructuring Program increasedreduced sales by 2 percent. Organic sales increased 410 percent as changes in net selling prices increased sales by 6 percent, volumes grew 2 percent and changes in product mix increased sales by 3 percent and 1 percent, respectively.2 percent.
In North America, organic sales increased 313 percent in consumer products and 16increased 5 percent in K-C Professional.Outside North America, organic sales increased 6rose 10 percent in D&E markets and were even with the prior year8 percent in developed markets.
Operating profit in the thirdfirst quarter was $657$693 in 20212022 and $666$770 in 2020. 2021.Results in both periods2022 include the net benefit of the acquisition of a controlling interest in Thinx, compared to 2021 results which include charges related to the 2018 Global
Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia. ThirdProgram.First quarter adjusted operating profit was $745$629 in 20212022 and $806$804 in 2020. 2021.Results were impacted by $480$470 of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs.Higher marketing, research and general expense as well as the impact of unfavorable foreign currency transaction effects reduced operating profit in the quarter. Results benefited from organic sales growth, $115$50 of cost savings from our FORCE program $35 of cost savings from the 2018 Global Restructuring Program and lower marketing, research and general expense.
other manufacturing costs.
The thirdfirst quarter effective tax rate was 21.618.2 percent in 20212022 and 20.120.9 percent in 2020.2021. The thirdfirst quarter adjusted effective tax rate was 21.0 percent in 2022 and 20.9 percent in 2021 and 22.4 percent in 2020.2021.
Kimberly-Clark’sOur share of net income of equity companies in the thirdfirst quarter was $21$23 in 20212022 and $31$39 in 2020. Kimberly-Clark de Mexico, S.A.B. de C.V.2021. Equity results in 2021 were negatively impacted by higher input costs but benefited from organic sales growth, favorable currency effects and cost savings.inflation.
Diluted net income per share for the thirdfirst quarter of 2022 was $1.39$1.55 and $1.72 in 2021 and $1.38 in 2020. Third2021. First quarter adjusted earnings per share were $1.62$1.35 in 2021,2022, a decrease of 625 percent compared to $1.72$1.80 in 2020.
Year-to-date net sales of $14.5 billion increased 1 percent compared to the year ago period. Organic sales decreased 2 percent as volumes declined 5 percent while changes in net selling prices and product mix increased sales by 2 percent and 1 percent, respectively. Changes in foreign currency exchange rates increased sales by approximately 2 percent and the net impact of the Softex Indonesia acquisition and business exits in conjunction with the 2018 Global Restructuring Program increased sales by 2 percent. Year-to-date operating profit was $2,040 in 2021 and $2,495 in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia. Year-to-date adjusted operating profit was $2,225 in 2021 and $2,815 in 2020. Results were impacted by lower sales volumes, $960 of higher input costs and elevated other manufacturing costs. Results benefited from higher net selling prices, $295 of FORCE savings, $105 of cost savings from the 2018 Global Restructuring Program and reduced marketing, research and general expense. Through nine months, diluted net income per share was $4.31 in 2021 and $5.30 in 2020. Year-to-date adjusted earnings per share were $4.89 in 2021 and $6.06 in 2020.2021.
Results by Business Segments
Personal Care | | | Three Months Ended September 30 | | Nine Months Ended September 30 | |
| | Three Months Ended September 30 | | Nine Months Ended September 30 | | Three Months Ended March 31 | | |
| | Three Months Ended March 31 | |
| | 2021 | | 2020 | | 2021 | | 2020 | | | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | | | 2022 | | 2021 | |
Net Sales | Net Sales | | $ | 2,656 | | | $ | 2,339 | | | $ | 7,635 | | | $ | 6,990 | | | Operating Profit | | $ | 496 | | | $ | 486 | | | $ | 1,431 | | | $ | 1,532 | | Net Sales | | $ | 2,729 | | | $ | 2,462 | | | | Operating Profit | | $ | 475 | | | $ | 481 | | |
| Net Sales | Net Sales | | Percent Change | | Percent Change | | Operating Profit | | Percent Change | | Percent Change | Net Sales | | | Percent Change | | | Operating Profit | | | Percent Change | |
Volume | Volume | | 3 | | | | 1 | | | Volume | | 4 | | | | (1) | | Volume | | 3 | | | | Volume | | 1 | | |
Net Price | Net Price | | 4 | | | 1 | | | Net Price | | 21 | | | 6 | | Net Price | | 8 | | | | Net Price | | 40 | | |
Mix/Other | Mix/Other | | 2 | | | 2 | | | Input Costs | | (46) | | | (27) | | Mix/Other | | 3 | | | | Input Costs | | (44) | | |
Acquisition/Exited Businesses(e) | | 3 | | | 4 | | | Cost Savings(c) | | 9 | | | 10 | | |
Currency | Currency | | 1 | | | 1 | | | Currency Translation | | 1 | | | 1 | | Currency | | (2) | | | | Cost Savings(c) | | 5 | | |
Total(a) | Total(a) | | 14 | | | 9 | | | Other(d) | | 13 | | | 4 | | Total(a) | | 11 | | | | Currency Translation | | (3) | | |
| | | | | | Other(d) | | — | | |
Organic(b) | Organic(b) | | 9 | | | 4 | | | Total | | 2 | | | (7) | | Organic(b) | | 13 | | | | Total | | (1) | | |
(a) Total may not equal the sum of volume, net price, mix/other acquisition/exited businesses and currency due to rounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Combined benefitsBenefits of the FORCE program and 2018 Global Restructuring Program.program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
(e) Combined impact of the acquisition of Softex Indonesia and exited businesses in conjunction with the 2018 Global Restructuring Program.
ThirdFirst quarter net sales in North America increased 11 percent. Changes in net selling prices increased sales by 5 percent, volumes rose 4 percent and changes in product mix increased sales by 2 percent. Changes in foreign currency exchange rates increased sales by 1 percent, while exited business related to the 2018 Global Restructuring program reduced sales by 1 percent.
Net sales in D&E markets increased 18 percent. The Softex Indonesia acquisition increased sales by approximately 11 percent while changes in foreign currency exchange rates increased sales by 116 percent. Changes in net selling prices and product mix increased sales by 48 percent and 3 percent, respectively. Volumes rose 5 percent, in part due to the weather-related supply chain disruptions in the year-ago period. Organic sales were up double-digits in baby & child care, adult care and feminine care.
Net sales in D&E markets increased 8 percent. Changes in Argentina, Brazil, China, Eastern Europe, Indianet selling prices and South Africa butproduct mix increased sales by 9 percent and 3 percent, respectively, while volumes declined 1 percent. Changes in ASEANforeign currency exchange rates decreased sales by 3 percent. Organic sales growth was strong across all regions and most of the rest of Latin America.categories.
Net sales in developed markets outside North Americaincreased 11 percent including a 4 percent favorable impact from changes in foreign currency exchange rates.5 percent. Volumes increased 58 percent and changes in net selling prices increased sales by 24 percent, while changes in foreign currency exchange rates decreased sales by 7 percent.
Operating profit of $496 increased 2$475 decreased 1 percent. Results benefited from organic sales growth, cost savings and reduced marketing, research and general expense. The comparison was impacted by input cost inflation.inflation, higher marketing, research and general expense as well as unfavorable foreign currency effects. Results benefited from organic sales growth and cost savings.
Consumer Tissue | | | Three Months Ended September 30 | Nine Months Ended September 30 | |
| | Three Months Ended September 30 | | Nine Months Ended September 30 | | Three Months Ended March 31 | | |
| | Three Months Ended March 31 | |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 | | | 2022 | | 2021 | |
Net Sales | Net Sales | | $ | 1,541 | | | $ | 1,623 | | | $ | 4,475 | | | $ | 4,991 | | | Operating Profit | | $ | 222 | | | $ | 318 | | | $ | 687 | | | $ | 1,111 | | Net Sales | | $ | 1,568 | | | $ | 1,510 | | | | Operating Profit | | $ | 171 | | | $ | 269 | | |
| Net Sales | Net Sales | | Percent Change | | Percent Change | | Operating Profit | | Percent Change | | Percent Change | Net Sales | | | Percent Change | | | Operating Profit | | | Percent Change | |
Volume | Volume | | (7) | | | | (12) | | | Volume | | (15) | | | | (24) | | Volume | | 2 | | | | Volume | | (1) | | |
Net Price | Net Price | | 1 | | | | — | | | Net Price | | 6 | | | 2 | | Net Price | | 5 | | | | Net Price | | 26 | | |
Mix/Other | Mix/Other | | — | | | (1) | | | Input Costs | | (53) | | | (31) | | Mix/Other | | — | | | | Input Costs | | (66) | | |
Exited businesses(e) | | Exited businesses(e) | | (1) | | | | Cost Savings(c) | | 7 | | |
Currency | Currency | | 1 | | | | 2 | | | Cost Savings(c) | | 29 | | | 18 | | Currency | | (2) | | | | Currency Translation | | — | | |
Total(a) | Total(a) | | (5) | | | (10) | | | Currency Translation | | 1 | | | 2 | | Total(a) | | 4 | | | | Other(d) | | (2) | | |
Organic(b) | Organic(b) | | (6) | | | (12) | | | Other(d) | | 2 | | | (5) | | Organic(b) | | 7 | | | | Total | | (36) | | |
| | | Total | | (30) | | | (38) | | |
|
(a) Total may not equal the sum of volume, net price, mix/other, exited businesses and currency due to rounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Benefits of the FORCE program.
(d) Includes impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
(e) Impact of exited businesses in conjunction with the 2018 Global Restructuring Program.
First quarter net sales in North America increased 9 percent. Volumes grew 6 percent and changes in net selling prices increased sales by 4 percent, while unfavorable changes in product mix decreased sales by 1 percent. The volume growth reflects comparison to the start of COVID-related consumer and retailer inventory destocking in the year-ago period.
Net sales in D&E markets increased 3 percent. Changes in net selling prices increased sales by approximately 7 percent and changes in product mix increased sales by 1 percent, while volumes were down 2 percent. Changes in foreign currency exchange rates decreased sales by 2 percent.
Net sales in developed markets outside North America decreased 5 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales by 4 percent, and changes in foreign currency exchange rates decreased sales by 6 percent. Volumes were down 1 percent, while changes in net selling prices increased sales by approximately 6 percent.
Operating profit of $171 decreased 36 percent. The comparison was impacted by input cost inflation and higher marketing, research and general expense. Results benefited from organic sales growth, lower other manufacturing costs and cost savings.
K-C Professional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31 | | | |
| | Three Months Ended March 31 | | |
| | 2022 | | 2021 | | | | | | | | 2022 | | 2021 | | | | |
Net Sales | | $ | 780 | | | $ | 752 | | | | | | | Operating Profit | $ | 90 | | | $ | 126 | | | | | |
| | | | | | | | | | | | | | | | | | |
Net Sales | | | | Percent Change | | | | Operating Profit | | | | Percent Change | | |
Volume | | — | | | | | | | Volume | | (13) | | | | | |
Net Price | | 4 | | | | | | | Net Price | | 25 | | | | | |
Mix/Other | | 1 | | | | | | | Input Costs | | (63) | | | | | |
Currency | | (2) | | | | | | | Cost Savings(c) | | 6 | | | | | |
Total(a) | | 4 | | | | | | | Currency Translation | | (1) | | | | | |
| | | | | | | | | | Other(d) | | 17 | | | | | |
Organic(b) | | 6 | | | | | | | Total | | (29) | | | | | |
(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Combined benefitsBenefits of the FORCE program and 2018 Global Restructuring Program.
(d) Includes impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
Third quarter net sales in North America decreased 8 percent. Volumes fell 8 percent and changes in product mix decreased sales by 1 percent, while changes in net selling prices increased sales by 1 percent.
Net sales in D&E markets increased 5 percent including a 1 percent favorable impact from changes in foreign currency exchange rates. Changes in net selling prices and product mix increased sales by 3 percent and approximately 1 percent, respectively, while volumes were down 3 percent. The Softex Indonesia acquisition increased sales by 4 percent.
Net sales in developed markets outside North America decreased 6 percent. Volumes were down 6 percent, while changes in net selling prices increased sales by 1 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales by 4 percent, while changes in foreign currency exchange rates increased sales by 3 percent.
Operating profit of $222 decreased 30 percent. The comparison was impacted by lower organic sales, higher input costs and other manufacturing cost increases, including inefficiencies from lower production volumes. Results benefited from cost savings and reduced marketing, research and general expense.
K-C Professional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30 | | Nine Months Ended September 30 | |
| | Three Months Ended September 30 | | Nine Months Ended September 30 |
| | 2021 | | 2020 | | 2021 | | 2020 | | | | 2021 | | 2020 | | 2021 | | 2020 |
Net Sales | | $ | 797 | | | $ | 705 | | | $ | 2,314 | | | $ | 2,277 | | | Operating Profit | $ | 96 | | | $ | 87 | | | $ | 332 | | | $ | 423 | |
| | | | | | | | | | | | | | | | | | |
Net Sales | | Percent Change | | Percent Change | | Operating Profit | | Percent Change | | Percent Change |
Volume | | 6 | | | | | (7) | | | Volume | | 3 | | | | | (24) | |
Net Price | | 5 | | | | | 6 | | | Net Price | | 41 | | | | | 31 | |
Mix/Other | | — | | | | | 1 | | | Input Costs | | (98) | | | | | (47) | |
Currency | | 1 | | | | | 2 | | | Cost Savings(c) | | 12 | | | | | 11 | |
Total(a) | | 13 | | | | | 2 | | | Currency Translation | | 2 | | | | | 2 | |
Organic(b) | | 12 | | | | | — | | | Other(d) | | 50 | | | | | 5 | |
| | | | | | | | Total | | 10 | | | | | (22) | |
(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Combined benefits of the FORCE program and 2018 Global Restructuring Program.program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
First quarter net sales in North America increased 165 percent. Volumes increased approximately 10 percent and changesChanges in net selling prices and product mix increased sales by 6 percent. Changes in product mix4 percent and foreign currency exchange rates each increased1 percent, respectively. Washroom products sales slightly. Sales were up significantly in washroomstrong double-digits, while sales of wipers and safety products reflecting comparison toslowed versus a weak year-ago period.strong year-ago.
Net sales in D&E markets increased 14 percent including a 1 percent benefit from changes in foreign currency exchange rates. Volumes rose approximately 10 percent, compared to a soft year-ago period, and changes4 percent. Changes in net selling prices and product mix increased sales by 3 percent and 12 percent, respectively.respectively, and volumes grew by 2 percent. Changes in foreign currency exchange rates decreased sales by 3 percent.
Net sales in developed markets outside North America increased 3 percent including a 3 percent benefit from changes in foreign currency exchange rates.were even with the year-ago period. Changes in net selling prices and product mix increased sales by 5 percent and 3 percent, respectively, while volumes decreased 51 percent. Changes in foreign currency exchange rates reduced sales by 7 percent.
Operating profit of $96 increased 10$90 decreased 29 percent. The comparison was impacted by input cost inflation and higher marketing, research and general expense. Results benefited from organic sales growth, cost savings, lower other manufacturing costs and reduced marketing, research and general expense. The comparison was impacted by higher input costs.
2018 Global Restructuring Program
Third quarter 2021 pre-tax savings from the 2018 Global Restructuring Program were $35, bringing cumulative savings to $525. See Item 1, Note 2 to the unaudited interim consolidated financial statements for additional information.
To implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2021.cost savings.
Liquidity and Capital Resources
Cash Provided by Operations
Cash provided by operations was $1.7 billion$204 for the first ninethree months of 20212022 compared to $2.8 billion$321 in the prior year. The decreasedecline was driven by lower earnings, working capital increase in accounts receivable and inventory, payments for accrued expenses and timing of tax payments.operating profit.
Investing
During the ninethree months ended September 30, 2021,March 31, 2022, our capital spending was $734$253 compared to $894$298 in the prior year. We anticipate that full year capital spending will be $1.0 billion to $1.1 billion, down from our prior estimatebillion. Acquisition of $1.1 to $1.2 billion.business, net of cash acquired of $34 in the first quarter of 2022 reflected the acquisition of a controlling interest of Thinx.
Financing
Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other similar short-term debt issued by non-U.S. subsidiaries, was $1.1$1.0 billion as of September 30, 2021March 31, 2022 (included in Debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the thirdfirst quarter of 20212022 was $1.3$0.9 billion. These short-term borrowings provide supplemental funding for supportingto support our operations. The level of short-term debt
generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as dividends and income taxes.
At September 30, 2021March 31, 2022 and December 31, 2020,2021, total debt was $8.9$9.1 billion and $8.4 $8.6 billion, respectively.
We maintain a $2.0 billion revolving credit facility which expires in June 2026 and a $750 revolving credit facility which expires in June 2022. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.
The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), is in the process of phasing out LIBOR with completion of the phase out expected by June 30, 2023. We have evaluated the potential effect of the elimination of LIBOR and do not expect the effect to be material. Accounting guidance has been issued to ease the transition to alternative reference rates from a financial reporting perspective.
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During the first ninethree months of 2021,2022, we repurchased 3.0 million214 thousand shares of our common stock at a cost of $393 $27 through a broker in the open market. We expect ourare targeting full-year 2022 share repurchases will beof approximately $400, at the low end of the previously estimated range of $400$100, subject to $450.
K-C Argentina began accounting for their operations as highly inflationary effective July 1, 2018, as required by GAAP. Under highly inflationary accounting, K-C Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material. As of September 30, 2021, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were approximately 1 percent of our consolidated net sales for the three and nine months ended September 30, 2021.market conditions.
We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, payments for our 2018 Global Restructuring Program, capital spending, pension contributions, dividends and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.
Information Concerning Forward-Looking Statements
Certain matters contained in this report concerning the business outlook, including raw material, energy and other input costs, the anticipated cost savings from our FORCE program, costs and savings from the 2018 Global Restructuring Program, cash flow and uses of cash, growth initiatives, innovations, marketing and other spending, net sales, anticipated currency rates and exchange risks, including the impact in Argentina, effective tax rate, contingencies and anticipated transactions of Kimberly-Clark, including dividends, share repurchases and pension contributions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of
1995 and are based upon management's expectations and beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.
The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control,control, including the war in Ukraine (including the related responses of consumers, customers, and suppliers and sanctions issued by the U.S., the European Union, Russia or other countries), pandemics (including the ongoing COVID-19 outbreak and the related responses of governments, consumers, customers, suppliers and employees), epidemics, fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, supply chain disruptions, due to COVID-19, changes in customer preferences, (including consumer tissue destocking following a COVID-19 related stock up in 2020), severe weather conditions, or government trade or similar regulatory actions, potential competitive pressures on selling prices for our products, energy costs, general economic and political conditions globally and in the markets in which we do business, as well as our ability to maintain key customer relationships, and to realize the expected benefits and synergies of the Softex Indonesia acquisition, could affect the realization of these estimates.
For a description of certainThe factors thatdescribed under Item 1A, "Risk Factors" in this Form 10-K, or in our other SEC filings, among others, could cause our future results to differ from those expressed in theseany forward-looking statements see Item 1A ofmade by us or on our Annual Report on Form 10-K for the year ended December 31, 2020 entitled "Risk Factors."behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.
Item 4. Controls and Procedures
As of September 30, 2021,March 31, 2022, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2021.March 31, 2022. There were no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. All our share repurchases during the thirdfirst quarter of 20212022 were made through a broker in the open market.
The following table contains information for shares repurchased during the thirdfirst quarter of 2021.2022. None of the shares in this table were repurchased directly from any of our officers or directors.
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Period (2021) | | Total Number of Shares Purchased(a) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(b) |
July 1 to July 31 | | 310,500 | | | $ | 135.07 | | | 38,142,476 | | | 41,857,524 | |
August 1 to August 31 | | 58,807 | | | 135.91 | | | 38,201,283 | | | 41,798,717 | |
September 1 to September 30 | | 55,500 | | | 136.60 | | | 38,256,783 | | | 41,743,217 | |
Total | | 424,807 | | | | | | | |
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Period (2022) | | Total Number of Shares Purchased(a) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(b) |
January 1 to January 31 | | 10,500 | | | $ | 137.56 | | | 38,320,083 | | | 41,679,917 | |
February 1 to February 28 | | 87,300 | | | 132.31 | | | 38,407,383 | | | 41,592,617 | |
March 1 to March 31 | | 117,000 | | | 123.38 | | | 38,524,383 | | | 41,475,617 | |
Total | | 214,800 | | | | | | | |
(a)Share repurchases were made pursuant to a share repurchase program authorized by our Board of Directors on November 13, 2014. This program allows for the repurchase of 40 million shares in an amount not to exceed $5 billion (the "2014 Program").
(b)Includes shares under the 2014 Program, as well as available shares under a share repurchase program authorized by our Board of Directors on January 22, 2021 that allows for the repurchase of 40 million shares in an amount not to exceed $5 billion.
Item 6. Exhibits
(a)Exhibits
Exhibit No. (4). Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
Exhibit No. (101).INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
Exhibit No. (101).SCH XBRL Taxonomy Extension Schema Document
Exhibit No. (101).CAL XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit No. (101).DEF XBRL Taxonomy Extension Definition Linkbase Document
Exhibit No. (101).LAB XBRL Taxonomy Extension Label Linkbase Document
Exhibit No. (101).PRE XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit No. 104 The cover page from this Current Report on Form 10-Q formatedformatted as Inline XBRL
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | KIMBERLY-CLARK CORPORATION |
| | (Registrant) |
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By: | | /s/ Andrew S. Drexler |
| | Andrew S. Drexler |
| | Vice President and Controller |
| | (principal accounting officer) |
October 25, 2021April 22, 2022