Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
We are organized into operating segments based on product groupings. These operating segments have been aggregated into three reportable global business segments as follows:
These reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute our global strategies to drive growth and profitability of our personal care, consumer tissue and KCPK-C Professional operations. 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.
Products for household use are sold directly to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores and other retail outlets, as well as through other distributors and e-commerce. Products for away-from-home
We own various patents and trademarks registered domestically and in many foreign countries. We consider the patents and trademarks that we own and the trademarks under which we sell certain of our products to be material to our business. Consequently, we seek patent and trademark protection by all available means, including registration.
Cellulose fiber, in the form of kraft pulp or fiber recycled from recovered waste paper, is the primary raw material for our tissue products, and in the form of fluff pulp, is a component of disposable diapers, training and youth pants, feminine pads and incontinence care products.
Polypropylene and other synthetics and chemicals are the primary raw materials for manufacturing nonwoven fabrics, which are used in disposable diapers, training and youth pants, wet wipes, feminine pads, incontinence care products, and away-from-home wipers and apparel. Superabsorbent materials are important components of disposable diapers, training and youth pants and incontinence care products.
Raw materials are purchased from third parties, and we consider the supply to be adequate to meet the needs of our businesses. See Item 1A, "Risk Factors."
We have several major competitors in most of our markets, some of which are larger and more diversified than us. The principal methods and elements of competition include brand recognition and loyalty, product innovation, quality and performance, price, and marketing and distribution capabilities. For additional discussion of the competitive environment in which we conduct our business, see Item 1A, "Risk Factors."
We operate and market our products globally, and our business strategy includes targeted growth in Asia, Latin America, Asia, Eastern Europe, the Middle East and Africa, with a particular emphasis in China, Eastern Europe and Latin America.Africa. See Item 1A, "Risk Factors" for a discussion of foreign market risks that may affect our financial results.
Total environmental capital expenditures and operating expenses are not expected to have a material effect on our total capital and operating expenditures, consolidated earnings or competitive position. Current environmental spending estimates could be modified as a result of changes in our plans or changes in legal requirements, including any requirements related to global climate change or other factors.
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In response to the ongoing COVID-19 pandemic, we have implemented additional workplace safety programs and processes in all our facilities. As the circumstances and impacts of COVID-19 evolve, we continue to evaluate our response and adapt to protect the health and safety of our employees.
•Development and employee engagement – Developing talent and leaders at all levels of the organization and engaging our employees is critical to our long-term success. We maintain talent and succession planning processes and have leadership and management development programs as well as broad learning opportunities for all employees to support their career growth and advance their skills.
We also offer employees the opportunity to join Employee Resource Groups ("ERGs"). These groups foster professional development, social connectivity, and celebrate diversity throughout our company. Current ERGs provide community and insights into the perspectives and experiences of those with African, Hispanic, Latino, and Asian ancestry, women, and LGBTQ+, as well as parents, caregivers, people with disabilities, military veterans, and new employees. Our ERGs promote career development by allowing employees to connect with and learn from one another and help amplify our inclusion, equity and diversity efforts.
Further, in regard to employee engagement, we hold regular Town Hall meetings where employees can ask questions of executives and make their voice heard. We also host global conversations about racism, bias and other important topics. We engage in continuous listening via global surveys, on an ongoing basis, that offer our employees the ability to provide feedback and valuable insight to help address potential issues and identify opportunities to improve and support employee engagement.
•Compensation and benefits – We provide market-based competitive compensation through our salary, annual incentive and long-term incentive programs and robust benefits packages that promote employee well-being across all aspects of their lives. Eligible employees are compensated for their contributions to our goals with both short-term cash incentives and long-term equity-based incentives. We also provide a variety of resources and services to help our employees plan for retirement. We believe the structure of our compensation packages provides the appropriate incentives to attract, retain and motivate our employees.
The MDC is responsible for establishing and administering the policies governing annual compensation and long-term compensation to ensure that the policies are designed to align compensation with our overall business strategy and performance.
Available Information
We make financial information, news releases and other information available on our corporate website at www.kimberly-clark.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on this website as soon as reasonably practicable after we file these reports and amendments with, or furnish them to, the Securities and Exchange Commission ("SEC"). The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC. Stockholders may also contact Stockholder Services, P.O. Box 612606, Dallas, Texas 75261-2606 or call 972-281-5317 to obtain a hard copy of these reports without charge.
ITEM 1A. RISK FACTORS
Our business faces many risks and uncertainties that we cannot control. Any of the risks discussed below, as well as factors described in other places in this Form 10-K, or in our other filings with the SEC, could adversely affect our business, consolidated financial position, results of operations or cash flows. In addition, these items could cause our future results to differ from those in any of our forward-looking statements. These risks are not the only ones we face. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.
Business Operations
Significant increases in prices for raw materials, energy, transportation or other necessary supplies or services, without corresponding increases in our selling prices, could adversely affect our financial results.
Increases in the cost and availability of raw materials, including pulp and petroleum-based materials, the cost of energy, transportation and other necessary services, supplier constraints, supplier consolidation which could limit our sources of supply
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for these items, an inability to maintain favorable supplier arrangements and relations or an inability to avoid disruptions in production output could have an adverse effect on our financial results.
Cellulose fiber, in the form of kraft pulp or recycled fiber from recovered waste paper, is used extensively in our tissue products and is subject to significant price fluctuations. Cellulose fiber, in the form of fluff pulp, is a key component in our personal care products. In past years, pulp prices have experienced significant volatility. Increases in pulp prices or limits in the availability of recycled fiber could adversely affect our earnings if selling prices for our finished products are not adjusted or if these adjustments significantly trail the increases in pulp prices. We utilize a variety of pricing structures to manage these risks but have not used derivative instruments.
A number of our products, such as diapers, training and youth pants, feminine pads, incontinence care products and disposable wipes, contain certain materials that are principally derived from petroleum. These materials are subject to price fluctuations based on changes in petroleum prices, availability and other factors, with these prices experiencing significant volatility in recent years. We purchase these materials from a number of suppliers. Significant increases in prices for these materials could adversely affect our earnings if selling prices for our finished products are not adjusted, if these adjustments significantly trail the increases in prices for these materials, or if we do not utilize lower priced substitutes for these materials.
Our manufacturing operations utilize electricity, natural gas and petroleum-based fuels. To help ensure we use energy efficiently and cost-effectively, we maintain energy efficiency improvement programs at our manufacturing sites. Our contracts with energy suppliers vary as to price, payment terms, quantities and duration. Our energy costs are also affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions (including actions taken to address climate change and related market responses) and geopolitical factors. There can be no assurance that we will be fully protected against substantial changes in the price or availability of energy sources.
There can be no assurance that our efforts to minimize the impact of increased costs, including increasing selling prices, in response to the increased costs will be successful.
Cyber-attacks, privacy breaches, data breaches or a failure of key information technology systems could disrupt our business operations and cause us financial and reputational damage.
Increased cyber-security threats and computer crime pose a potential risk to the security of our information technology systems, including those of third-party service providers with whom we have contracted, as well as the confidentiality, integrity and availability of the data stored on those systems. Further, data privacy is subject to frequently changing rules and regulations regarding the handling of personal data, such as the GDPR, LGPD, PIPL and CCPA. Any breach in our information technology security systems could result in the disclosure or misuse of confidential or proprietary information, including sensitive customer, supplier, employee or investor information maintained in the ordinary course of our business. Any such event, or any failure to comply with these data privacy requirements or other laws in this area, could cause damage to our reputation, loss of valuable information or loss of revenue and could result in legal liability, or regulatory or other penalties. In addition, we may incur large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, or to protect against similar future events.
Our information technology systems, some of which are dependent on services provided by third parties, serve an important role in the efficient and effective operation and administration of our business. These systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, user or system errors, computer viruses or cyber-based attacks. The risk of cyber-based attacks is heightened with many of our employees working and accessing our technology infrastructure remotely. While we have contingency plans in place to prevent or mitigate the impact of these events, if they were to occur and our disaster recovery plans do not effectively address the issues on a timely basis, we could suffer interruptions in our ability to manage our operations, which may adversely affect our business and financial results.
We are in the process of upgrading our enterprise resource planning system (known as SAP) to enhance operating efficiencies and provide more effective management of our business operations.The upgrade poses several challenges, including training of personnel, communication of new rules and procedures, migration of data, and the potential instability of the new system.Moreover, there is no assurance that the new system will meet our current and future business needs or that it will operate as
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designed.Any significant failure or delay in the system upgrade could cause an interruption to our business and adversely affect our operations and financial results.
Our international operations are subject to foreign market risks, including changes in foreign currency exchange rates, currency restrictions and political, social and economic instability, which may adversely affect our financial results.
Our strategy includes operations growth outside the U.S., especially in developing markets such as China, Eastern Europe, ASEAN and Latin America. About half of our net sales come from markets outside the U.S. We and our equity companies have manufacturing facilities in 33 countries and sell products in a substantial majority of countries around the world. Our results may be substantially affected by a number of foreign market risks:
•Exposure to the movement of various currencies against each other and the U.S. dollar. A portion of the exposures, arising from transactions and commitments denominated in non-local currencies, is systematically managed through foreign currency forward and swap contracts where available and economically advantageous. We do not generally hedge our income statement translation exposure with respect to foreign operations.
•Increases in currency exchange restrictions. These restrictions could limit our ability to repatriate earnings from outside the U.S. or obtain currency exchange for U.S. dollar inputs to continue operating in certain countries.
•Adverse political conditions. Risks related to political instability (including the war in Ukraine), expropriation, new or revised legal or regulatory constraints, difficulties in enforcing contractual and intellectual property rights, and potentially adverse tax consequences could adversely affect our financial results.
•Increases in dollar-based input costs for operations outside the U.S. due to weaker foreign exchange rates versus the U.S. dollar. There can be no assurance that we will be protected against substantial foreign currency fluctuations.
•Greater economic volatility and vulnerability to infrastructure and labor disruptions.
The inability to effectively manage foreign market risk could adversely affect our business, consolidated financial condition, results of operations or liquidity. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and Item 8, Note 1 to the consolidated financial statements for information regarding our adoption of highly inflationary accounting in Argentina and Turkey.
Our operations in Russia and the surrounding region are impacted by the war in Ukraine.
The war between Russia and Ukraine has negatively impacted, and may continue to negatively impact, our operations in Russia and the surrounding region. Beginning in March 2022, we have implemented significant adjustments to our business in Russia. We have substantially curtailed media, advertising and promotional activity and suspended capital investments at our single manufacturing facility in Russia. Consistent with the humanitarian nature of our products, we manufacture and sell only essential items in Russia, such as baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies. Our ability to continue our reduced operations in Russia may change as we continue to experience increased input costs, supply chain complexities, reduced consumer demand, restricted access to financial institutions and increased monetary, currency and payment controls. As the business, geopolitical, and regulatory environment concerning Russia evolves, we may not be able to sustain the limited manufacture and sale of our products, and our assets may be partially or fully impaired. Moreover, the war in Ukraine could result in cyber-based attacks to our information technology systems, disruptions to foreign exchange rates and financial and credit markets and amplify or affect the other risk factors set forth in this Part I, Item 1A, any of which may adversely affect our business.
We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and cash flows.
Our business and financial results may be negatively impacted by health epidemics, pandemics and similar outbreaks. The ongoing COVID-19 pandemic has had and could continue to have negative impacts on our business, including causing significant volatility in demand for our products, changes in consumer behavior and preference, disruptions in our manufacturing and supply chain operations, disruptions to our cost saving programs, limitations on our employees’ability to work and travel, significant changes in the economic or political conditions in markets in which we operate and related currency and commodity volatility. Despite our efforts to manage these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak and actions taken to contain its spread and mitigate its public health effects.
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Damage to the reputation of Kimberly-Clark or to one or more of our brands could adversely affect our business.
Developing and maintaining our reputation, as well as the reputation of our brands, is a critical factor in our relationship with consumers, customers, suppliers and others. Our inability to address adverse publicity or other issues, including concerns about product safety, quality, efficacy, environmental impacts (including packaging, energy and water use and waste management), inclusion, equity and diversity, human rights and other sustainability or similar matters, or breaches of consumer, customer, supplier, employee or other confidential information, real or perceived, could negatively impact sentiment towards us and our products and brands, and our business and financial results could suffer. In addition, our products could face withdrawal, recall or other quality issues. Consumers increasing use and reliance on social media for information could increase the risk of adverse publicity, potentially with negative perception of our products or brands. Our business and results could also be negatively impacted by the effects of product-related litigation, allegations of product tampering or contamination, or the distribution and sale of counterfeit products.
Disruption in our supply chain or our manufacturing or distribution operations could adversely affect our business.
Our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes or labor shortages, terrorism, epidemics, pandemics (including the ongoing COVID-19 pandemic), import restrictions, regional economic, business, environmental or political events (including the war in Ukraine), governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could disrupt our supply chain and impair our ability to manufacture or sell our products. This interruption, if not mitigated in advance or otherwise effectively managed, could adversely impact our business, financial condition and results of operations, as well as require additional resources to address.
We have a complex network of suppliers, including a number of sole-source and single-source suppliers for certain commodities and raw material inputs. In addition, third parties manufacture some of our products and provide certain administrative services. Disruptions or delays at these suppliers, third-party manufacturers or service providers due to the reasons above or the failure of these parties, manufacturers or service providers to otherwise satisfactorily perform, could adversely impact our operations, sales, payments to our suppliers, employees, and others, and our ability to report financial and management information on a timely and accurate basis. In the case of our sole-source suppliers, failure to successfully negotiate satisfactory purchase terms could adversely impact our business.
There is no guarantee that our ongoing efforts to reduce costs will be successful.
We continue to implement plans to improve our competitive position by achieving cost reductions in our operations. In addition, we expect ongoing cost savings from our continuous improvement activities. We anticipate these cost savings will result from reducing material costs and manufacturing waste and realizing productivity gains, distribution efficiencies and overhead reductions in each of our business segments and in our corporate functions. Any negative impact these plans have on our relationships with employees, suppliers or customers or any failure to generate the anticipated efficiencies and savings could adversely affect our financial results.
We may acquire or divest product lines or businesses, which could impact our results.
We may pursue acquisitions of product lines or businesses from third parties. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired product lines or businesses, estimation and assumption of liabilities and contingencies, personnel turnover and the diversion of management's attention from other business concerns. We may be unable to successfully integrate and manage product lines or businesses that we may acquire in the future, or be unable to achieve anticipated benefits or cost savings from acquisitions in the timeframe we anticipate, or at all.
We may periodically divest product lines or businesses. These divestitures may adversely impact our results if we are unable to offset the dilutive impacts from the loss of revenue associated with the divested products or businesses, or mitigate overhead costs allocated to those businesses. Furthermore, the divestitures could adversely affect our ongoing business operations, including by enhancing our competitors' positions or reducing consumer confidence in our ongoing brands and products.
The inability to effectively and efficiently manage acquisitions and divestitures with the results we expect or in the timeframe we anticipate could adversely affect our business, consolidated financial condition, results of operations or liquidity.
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Disruptions in the credit markets or changes to our credit ratings may adversely affect our business.
We access the long-term and short-term capital markets to obtain financing. Our financial performance, our short- and long-term debt credit ratings, interest rates, the stability of financial institutions with which we partner, geopolitical or national political developments (including those related to the ability of Congress to raise the U.S. federal debt ceiling), the stability and liquidity of the overall global capital markets and the state of the global economy, could affect our access to, and the availability and cost of, financing on acceptable terms and conditions and our ability to pay dividends in the future.
We regularly access the commercial paper market for ongoing funding requirements. A downgrade in our credit ratings by a credit rating agency could increase our borrowing costs and adversely affect our ability to issue commercial paper. Disruptions in the commercial paper market or other effects of volatile economic conditions on the credit markets also could reduce the amount of commercial paper that we could issue and raise our borrowing costs for both short- and long-term debt offerings.
Disruptions in the credit markets, limitations on our ability to borrow, a reduction in our liquidity or an increase in our borrowing costs could materially and adversely affect our financial condition and results of operations.
Climate change and other sustainability matters may adversely affect our business and operations.
There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. We have transition risks related to the transition to a lower-carbon economy and physical risks related to the physical impacts of climate change. Transition risks include increased costs of carbon emission, increased cost to produce products in compliance with future regulations, increased raw materials cost, shifts in customer/consumer values and other legal, regulatory and technological risks. Physical risks include the risk of direct damage to assets or supply chain disruption caused by severe weather events such as floods, storms, wildfires and droughts. In addition, concern over climate change may result in new legal and regulatory requirements to reduce or mitigate the effects of climate change on the environment. Despite our sustainability efforts, any failure to achieve our sustainability goals, including those aimed to reduce our impact on, improve or preserve the environment, or the perception (whether or not valid) that we have failed to act responsibly with respect to such matters or to effectively respond to new legal or regulatory requirements regarding climate change, could adversely affect our business and reputation.
There is also increased focus, including by governmental and non-governmental organizations, investors, customers, consumers, our employees and other stakeholders on these and other sustainability matters, including responsible sourcing and deforestation, the use of plastic, energy and water, the recyclability or recoverability of packaging, including single-use and other plastic packaging and ingredient transparency. Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to sustainability matters, which could adversely affect our business.
Marketing and Competition
Increasing dependence on key retailers in Developed Markets and the emergence of new sales channels may adversely affect our business.
Our products are sold in a highly competitive global marketplace, which continues to experience increased concentration and the growing presence of large-format retailers, discounters and e-tailers. With the consolidation of retail trade, both traditional retailers and e-tailers, we are dependent on key customers, and some of these customers, including large-format retailers and large e-tailers, may have significant bargaining power. They may use this leverage to demand higher trade discounts or allowances which could lead to reduced profitability. We may also be negatively affected by changes in the policies of our retail trade customers, such as inventory destocking, limitations on access to shelf space, delisting of our products, additional requirements related to safety, environmental, social and other sustainability issues, and other conditions. If we lose a significant customer or if sales of our products to a significant customer materially decrease, our business, financial condition and results of operations may be adversely affected.
Intense competition for sales of our products, changes in consumer purchasing patterns and the inability to innovate or market our products effectively could have an adverse effect on our financial results.
We operate in highly competitive domestic and international markets against well-known, branded products and low-cost or private label products. Inherent risks in our competitive strategy include uncertainties concerning trade and consumer acceptance, the effects of consolidation within retailer and distribution channels, a growing e-commerce marketplace, and customers' and competitors' actions. Our competitors for these markets include global, regional and local manufacturers,
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including private label manufacturers. Some of these competitors may have better access to financial resources and greater market penetration, which enable them to offer a wider variety of products and services at more competitive prices. Alternatively, some of these competitors may have significantly lower product development and manufacturing costs, particularly with respect to private label products, allowing them to offer products at a lower price. E-commerce potentially intensifies competition by simplifying distribution and lowering barriers to entry. The actions of these competitors could adversely affect our financial results. ItIn order to stay competitive, it may be necessary for us to lower prices on our products and increase spending on advertising and promotions, which could adversely affect our financial results.
We may be unable to anticipate or adequately respond to changes in consumer demand for our products. Demand for our products may change based on many factors, including shifting consumer purchasing patterns to lower cost options such as private-label products and mid to lower-tier value products, low birth rates in certain countries due to slow economic growth or other factors, negative customer or consumer response to pricing actions, consumer shifts in distribution from traditional retailers to e-tailers, subscription services and direct to consumer businesses, changing consumer preferences due to increased concerns in regard to post-consumer waste and packaging materials and their impact on environmental sustainability, or other changes in consumer trends or habits. If we experience lower sales due to changes in consumer demand for our products, our earnings could decrease.
Our ability to develop new products is affected by whether we can successfully anticipate consumer needs and preferences, develop and fund technological innovations, and receive and maintain necessary patent and trademark protection. In addition, we incur substantial development and marketing costs in introducing new and improved products and technologies. The introduction of a new consumer product (whether improved or newly developed) usually requires substantial expenditures for advertising and marketing to gain recognition in the marketplace. If a product gains consumer acceptance, it normally requires continued advertising and promotional support to maintain its relative market position. Some of our competitors may spend more aggressively on advertising and promotional activities, introduce competing products more quickly and respond more effectively to changing business and economic conditions. We may not be successful in developing new or improved products and technologies necessary to compete successfully in the industry, and we may not be successful in advertising, marketing, timely launching and selling our products. Also, if we fail to perfect or successfully assert our intellectual property rights, we may be less competitive, which could adversely affect our business, financial results and financial condition.
Increasing dependence on key retailers in developed marketsLegal and the emergence of new sales channels may adversely affect our business.
Our products are sold in a highly competitive global marketplace, which continues to experience increased concentration and the growing presence of large-format retailers, discounters and e-tailers. With the consolidation of retail trade, both traditional retailers and e-tailers, especially in developed markets such as the U.S., Europe and Australia, we are increasingly dependent on key
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customers, and some of these customers, including large-format retailers and large e-tailers, may have significant bargaining power. They may use this leverage to demand higher trade discounts or allowances which could lead to reduced profitability. We may also be negatively affected by changes in the policies of our retail trade customers, such as inventory de-stocking, limitations on access to shelf space, delisting of our products, additional requirements related to safety, environmental, social and other sustainability issues, and other conditions. If we lose a significant customer or if sales of our products to a significant customer materially decrease, our business, financial condition and results of operations may be adversely affected.
There is no guarantee that our ongoing efforts to reduce costs will be successful.
We continue to implement plans to improve our competitive position by achieving cost reductions in our operations, including implementing restructuring programs in functions or areas of our business where we believe such opportunities exist. On January 23, 2018, we announced a new global restructuring program. The 2018 Global Restructuring Program will reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. In addition, we expect ongoing cost savings from our continuous improvement activities. We anticipate these cost savings will result from reducing material costs and manufacturing waste and realizing productivity gains, distribution efficiencies and overhead reductions in each of our business segments and in our corporate functions. Any negative impact these plans have on our relationships with employees, suppliers or customers or any failure to generate the anticipated efficiencies and savings could adversely affect our financial results.
Significant increases in prices for raw materials, energy, transportation or other necessary supplies or services, without corresponding increases in our selling prices, could adversely affect our financial results.
Increases in the cost and availability of raw materials, including pulp and petroleum-based materials, the cost of energy, transportation and other necessary services, supplier constraints, an inability to maintain favorable supplier arrangements and relations or an inability to avoid disruptions in production output could have an adverse effect on our financial results.
Cellulose fiber, in the form of kraft pulp or recycled fiber from recovered waste paper, is used extensively in our tissue products and is subject to significant price fluctuations. Cellulose fiber, in the form of fluff pulp, is a key component in our personal care products. In past years, pulp prices have experienced significant volatility. Increases in pulp prices or limits in the availability of recycled fiber could adversely affect our earnings if selling prices for our finished products are not adjusted or if these adjustments significantly trail the increases in pulp prices. We have not used derivative instruments to manage these risks.
A number of our products, such as diapers, training and youth pants, feminine pads, incontinence care products and disposable wipes, contain certain materials that are principally derived from petroleum. These materials are subject to price fluctuations based on changes in petroleum prices, availability and other factors, with these prices experiencing significant volatility in recent years. We purchase these materials from a number of suppliers. Significant increases in prices for these materials could adversely affect our earnings if selling prices for our finished products are not adjusted, if these adjustments significantly trail the increases in prices for these materials, or if we do not utilize lower priced substitutes for these materials.
Our manufacturing operations utilize electricity, natural gas and petroleum-based fuels. To ensure we use all forms of energy efficiently and cost-effectively, we maintain energy efficiency improvement programs at our manufacturing sites. Our contracts with energy suppliers vary as to price, payment terms, quantities and duration. Our energy costs are also affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions (including actions taken to address climate change and related market responses). There can be no assurance that we will be fully protected against substantial changes in the price or availability of energy sources.
Our international operations are subject to foreign market risks, including changes in foreign currency exchange rates, currency restrictions and political, social and economic instability, which may adversely affect our financial results.
Our strategy includes operations growth outside the U.S., especially in developing markets such as China, Eastern Europe and Latin America. About half of our net sales come from markets outside the U.S. We and our equity companies have manufacturing facilities in 38 countries, and sell products in more than 175 countries. Our results may be substantially affected by a number of foreign market risks:
Exposure to the movement of various currencies against each other and the U.S. dollar. A portion of the exposures, arising from transactions and commitments denominated in non-local currencies, is systematically managed through foreign currency forward and swap contracts. We do not generally hedge our translation exposure with respect to foreign operations.
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Increases in currency exchange restrictions. These restrictions could limit our ability to repatriate earnings from outside the U.S. or obtain currency exchange for U.S. dollar inputs to continue operating in certain countries.
Adverse political conditions. Risks related to political instability, expropriation, new or revised legal or regulatory constraints, difficulties in enforcing contractual and intellectual property rights, and potentially adverse tax consequences, including consequences from Brexit, could adversely affect our financial results.
Increases in dollar-based input costs for operations outside the U.S. due to weaker foreign exchange rates versus the U.S. dollar. There can be no assurance that we will be protected against substantial foreign currency fluctuations.
The inability to effectively manage foreign market risk could adversely affect our business, consolidated financial condition, results of operations or liquidity.
If our information technology systems suffer interruptions, failures or breaches, our business operations could be disrupted and we could face financial and reputational damage.
Our information technology systems, some of which are dependent on services provided by third parties, serve an important role in the efficient and effective operation and administration of our business. These systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, computer viruses or cyber-based attacks. While we have contingency plans in place to prevent or mitigate the impact of these events, if they were to occur and our disaster recovery plans do not effectively address the issues on a timely basis, we could suffer interruptions in our ability to manage our operations, which may adversely affect our business and financial results.
Increased cyber-security threats and computer crime also pose a potential risk to the security of our information technology systems, including those of third party service providers with whom we have contracted, as well as the confidentiality, integrity and availability of the data stored on those systems. Any breach in our information technology security systems could result in the disclosure or misuse of confidential or proprietary information, including sensitive customer, supplier, employee or investor information maintained in the ordinary course of our business. Any such event could cause damage to our reputation, loss of valuable information or loss of revenue and could result in large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, or to protect against similar future events.
Disruption in our supply chain or the failure of third-party providers to satisfactorily perform could adversely impact our operations.
Our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, pandemics, import restrictions, regional economic, business, environmental or political events, governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could impair our ability to manufacture or sell our products. This interruption, if not mitigated in advance or otherwise effectively managed, could adversely impact our business, financial condition and results of operations, as well as require additional resources to address.
In addition, third parties manufacture some of our products and provide certain administrative services. Disruptions or delays at these third-party manufacturers or service providers due to the reasons above or the failure of these manufacturers or service providers to otherwise satisfactorily perform, could adversely impact our operations, sales, payments to our suppliers, employees, and others, and our ability to report financial and management information on a timely and accurate basis.Regulatory
Government regulations and enforcement, and potential litigation, could have an adverse effect on our financial results.
As a global company, we are subject to manya wide variety of laws and governmental regulations across all of the countries in which we do business, including laws and regulations involving marketing, antitrust, anti-bribery or anti-corruption, data privacy, product liability, product composition or formulation, packaging content or corporate responsibility after consumer purchase, environmental impact, intellectual property, employment, healthcare or other matters, as well as potentialmatters.
We could be subject to significant legal liability and litigation expense if we fail to comply with applicable laws, regulations, policies and related interpretations. Our business is subject to the risk of litigation involving customers, consumers, suppliers, competitors, shareholders, government agencies or others through private actions, class actions, whistleblower claims, administrative actions.
If we are unableproceedings, regulatory actions or other litigation. While it is our policy and practice to comply with all lawslegal and regulations, it could negatively impact our reputation andregulatory requirements applicable to our business, results. Wewe cannot provide assurance that our internal controlemployees and agents will follow our policies and procedures and ethics andat all times. A finding that we are in violation of, or out of compliance program will always protectwith, applicable laws or regulations could subject us from acts committed by our employeesto civil remedies, including fines, damages, injunctions, product recalls or agents. Adverse regulatory action, including a recall, regulatory or other governmental investigation, or product liability or other litigation may alsocriminal sanctions, any of which could adversely affect our business, results of operations, cash flows and financial conditioncondition. Whether or not a claim is successful, without merit or not fully pursued, negative publicity arising from allegations regarding our products, processes or business practices could adversely affect our reputation and business operations. Although we believe that none of these proceedings or requirements will have a material adverse effect on us, the outcome of these proceedings may not be as expected.
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| 5 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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brand image.
In addition, new or revised laws, regulations or regulationstheir interpretation may alter the environment in which we do business including the United Kingdom's withdrawal from the European Union, which could adversely impact our financial results. For example, new legislation or regulations may result in increased costs to us, directly for our compliance, or indirectly to the extent suppliers increase prices of goods and services because of increased compliance costs, excise taxes or reduced availability of raw materials.
DamageWhile we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to the reputation of Kimberly-Clark or to one or more of our brands could adversely affect our business.
Developing and maintaining our reputation,various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by
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| 9 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the reputationtiming and, if they prevail, the amount of our brands, is a critical factor in our relationship with consumers, customers, suppliers and others. Our inability to address adverse publicity or other issues, including concerns about product safety, quality, efficacy or similar matters, or breaches of consumer, customer, supplier, employee or other confidential information, real or perceived, could negatively impact sentiment towards us and our products and brands, and our business and financial results could suffer. Consumers increasing use and reliance on social media for information could increase the risk of adverse publicity, potentially with negative perception of our products or brands. Our business and results could also be negatively impacted by the effects of a significant product recall, product-related litigation, allegations of product tampering or contamination, or the distribution and sale of counterfeit products.recovery.
New or revised tax regulations could have an adverse effect inon our financial results.
We are subject to income tax requirements in various jurisdictions in the U.S. and internationally. Many of these jurisdictions have made changesTax laws are dynamic and subject to their tax policies, including tax reform in the U.S. that was enacted in December 2017. Overall, the impact of U.S. tax reform should reduce our effective tax rate; however, additional guidance orchange as new laws are passed and new interpretations of the Tax Act could negatively impact our financial results. Otherlaw are issued or applied. Some jurisdictions are contemplating changes or have unpredictable enforcement activity. Increases in applicable tax rates, implementation of new taxes, changes in applicable tax laws and interpretations of these tax laws and actions by tax authorities in jurisdictions in which we operate could reduce our after tax income and have an adverse effect on our results of operations.
The 2014 spin-off of our health care business could result in substantial tax liability to us and our stockholders.
On October 31, 2014, we completed the spin-off of our health care business, creating a stand-alone, publicly traded health care company, Halyard Health, Inc. ("Halyard"). Historically, the IRS provided companies seeking to perform a spin-off transaction with an advance ruling that the proposed spin-off transaction would qualify for tax-free treatment. However, the IRS no longer provides such advance rulings. Prior to completing the spin-off of our health care business, we obtained an opinion of counsel that neither we nor our U.S. stockholders will recognize taxable income, gain or loss for U.S. federal income tax purposes as a result of the spin-off. The opinion of counsel is based on certain statements and representations made by us, which, if incomplete or inaccurate in any material respect, could invalidate the opinion of counsel. In addition, this opinion is not binding on the IRS. Accordingly, the IRS or the courts may reach conclusions with respect to the spin-off that are different from the conclusions reached in the opinion of counsel.
If the spin-off and certain related transactions were determined to be taxable, we would be subject to a substantial tax liability. In addition, if the spin-off were deemed taxable, each U.S. holder of our common stock who received shares of Halyard would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
AtAs of December 31, 2017,2022, we own or lease:
•our principal executive office located in the Dallas, Texas metropolitan area;
four •five operating segment and geographic headquarters at two three U.S. and two international locations; and
•four global business service centers at one U.S. and three international locations.
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| 6 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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The locations of our and our equity affiliates' principal production facilities by major geographic areas of the world are as follows:
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| | | | |
Geographic Area: | Number of
Facilities
|
North America (in 1614 states in the U.S.) | 3228 |
|
| Outside North America | 6155 |
|
Total (in 38 countries)33 countries) | 9383 |
|
Many of these facilities produce multiple products.products, some across multiple segments. Consumer tissue and KCPK-C Professional products are produced in 5548 facilities and personal care products are produced in 5148 facilities. The list of properties above has not been reduced for any manufacturing facilities contemplated for closure or sale in the 2018 Global Restructuring Program. We believe thatthat our and our equity affiliates' facilities are suitable for their purpose, adequate to support their businesses and well maintained.
ITEM 3. LEGAL PROCEEDINGS
See Item 8, Note 911 to the consolidated financial statements, which is incorporated in this Item 3 by reference, for information on legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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| 10 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of our executive officers as of February 8, 2018,9, 2023, together with certain biographical information, are as follows:
Achal AgarwalEhab Abou-Oaf, 58,56, was elected President of K-C Asia-PacificProfessional in 2012.January 2022. He is responsible for our consumerglobal business in our Asia-Pacific region. From 2008 to 2012, his title was President, K-C North Asia. Mr. Agarwal joined Kimberly-Clark from PepsiCo, Inc. wherebusiness operations which provide a deep range of essential commercial products and services, including tissue and surface wipers, skin care, safety and do-it-yourself products. Previously, he served from March 2008 to June 2008 as Business Unit General Manager, Sub-SaharanVice President, Middle East & Africa Beverages and Snacks and as Chief Operating Officer, Greater China Beverages from 2005 to February 2008.
Larry P. Allgaier, 59, was elected Group President, K-C North America in April 2017.since 2020. Mr. AllgaierAbouf-Oaf joined Kimberly-Clark from Mars, Incorporated,Inc., a manufacturer of confectionery, pet food, and other food products, where he servedhad a number of positions with increasing responsibility over 19 years, including Regional President, Asia, Middle East & Africa Confectionery from 2017 to 2019 and Regional President, Asia Pacific, Middle East & Northern Africa Chocolate from 2016 to 2017 as President, Global Veterinary Health, and from 2012 to 2015 as President, North America Petcare.2017. Prior to joining Mars, Mr. Allgaier served from 2009 to 2012 as Chief Executive Officer of New Chapter, Inc., a vitamin, mineral and supplement company, and from 2003 to 2009 as President and Chief Executive Officer of the Over the Counter Medicines Unit at Novartis AG. He began his career athe spent ten years with The Procter & Gamble Company.Company in packaging, product development and marketing roles. He also serves on the board of trustees of the American University in Cairo and on the board of directors of the Singapore American School.
J. Scott BostonDoug Cunningham, 55, was elected Senior Vice President and Chief Human Resources Officer in January 2017. He is responsible for the design and implementation of all human capital strategies for Kimberly-Clark, including global compensation and benefits, talent management, diversity and inclusion, organizational effectiveness and corporate health services. From 2011 to April 2016, his title was Vice President HR-K-C International and from April 2016 to December 2017, his title was Vice President of Global Talent Management, HR Strategy & Operations. Prior to joining Kimberly-Clark, Mr. Boston served as Senior Vice President, Human Resources, for McKesson Corporation.
Gustavo Calvo Paz51, 56, was elected President, K-C Europe, Middle East & Africa ("EMEA") in 2014.2021. He is responsible for our consumer business in our Europe, Middle East & AfricaEMEA region. From 2010Prior to 2014,that, he served as Vice President K-C Middle East, Eastern Europeand Managing Director, Australia & Africa.New Zealand since 2019. Mr. Calvo PazCunningham joined Kimberly-Clark from Johnson & Johnson, a health care products company, where he served in 1996 and has held a numbermultiple roles of positions with increasing responsibility within our international business operations.across Asia Pacific, North America and Africa, most recently as Managing Director, Johnson & Johnson Pacific.
Sergio Cruz
Tamera Fenske, 51,44, was elected Senior Vice President K-C Latin Americaand Chief Supply Chain Officer in January 2017.September 2022. She is responsible for procurement, manufacturing, logistics, transportation, safety and sustainability, as well as our global nonwovens division. Ms. Fenske joined Kimberly-Clark from 3M Company where she served in multiple roles of increasing responsibility, most recently as Senior Vice President, U.S. and Canada Manufacturing and Supply Chain from February 2022 to September 2022, Senior Vice President Global Operations, Transportation & Electronics Business Group (TEBG) from 2021 to February 2022, Vice President of Global Operations, TEBG, from 2020 to 2021, Mfg/SC/LSS Vice President from 2018 to 2020, and Customer Value Stream Vice President from 2016 to 2018.
Zackery Hicks, 59, was elected Chief Digital and Technology officer in July 2022. He is responsible for our consumer business in our Latinall aspects of the company’s information technology and digital functions, including building brands and creating differentiated capability. Mr. Hicks joined Kimberly-Clark from Toyota Motors North America, region. From 2014 to January 2017, Mr. Cruz served as Vice President, K-C Latin America - Brazil and from 2011 to 2013,Inc., a subsidiary of Toyota Motor Corporation, a multinational automotive manufacturer, where he served as Managing Director, K-C Eastern Europe. Mr. Cruz joined Kimberly-Clark in 2005Executive Vice President and hasChief Digital Officer since April 2018, and held a numberroles of positions with increasing responsibility within our international business operations.with Toyota since 1996, including CEO and President of Toyota Connected North America. He also serves on the board of directors of Signet Jewelers Ltd.
Thomas J. FalkMichael D. Hsu, 59, was elected58, has served as Chairman of the Board since January 2020 and as Chief Executive Officer in 2003 and President and Chief Executive Officer in 2002.since January 2019. Prior to that, he served as President and Chief Operating Officer since 1999. Mr. Falk previously had been elected Group President - Global Tissue, Pulp and Paper in 1998,2017, where he was responsible for our global tissue businesses. Earlier in
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| 7 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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his career, Mr. Falk had responsibility for our North American Infant Care, Child Care and Wet Wipes businesses. Mr. Falk joined Kimberly-Clark in 1983 and has held other senior management positions. He has been a director of Kimberly-Clark since 1999. He also serves on the board of directors of Lockheed Martin Corporation, Catalyst Inc., the Global Consumer Goods Forum, and the University of Wisconsin Foundation, and serves as a governor of the Boys & Girls Clubs of America.
Maria Henry, 51, was electedSenior Vice President and Chief Financial Officer in 2015. Prior to joining Kimberly-Clark, Ms. Henry served as Chief Financial Officer of Hillshire Brands Company, a branded food products company, from 2012 to 2014, and Chief Financial Officer of Sara Lee Corporation’s North American Retail and Food Service business from 2011 to 2012. Prior to joining Sara Lee (the predecessor to Hillshire Brands) in 2011, Ms. Henry was Executive Vice President and Chief Financial Officer of Culligan International, where she was responsible for finance, strategy, business development and information technology. Before Culligan, Ms. Henry served as Chief Financial Officer of Vastera, Inc. She began her career at General Electric. She also serves on the board of directors of General Mills, Inc.
Michael D. Hsu, 53, was elected President and Chief Operating Officer and a member of the Board in January 2017. He is responsible for the day-to-day operations of our business units, along with our global innovation, marketing and supply chain functions. He served as Group President, - K-C North America from 2013 to 2016, where he was responsible for our consumer business in North America, as well as leading the development of new business strategies for global nonwovens. From 2012 to 2013, his title was Group President, - North America Consumer Products. He has been a director of Kimberly-Clark since2017. Prior to joining Kimberly-Clark, Mr. Hsu served as Executive Vice President and Chief Commercial Officer of Kraft Foods, Inc., a North American grocery manufacturing and processing conglomerate, from January 2012 to July 2012, as President of Sales, Customer Marketing and Logistics from 2010 to 2012 and as President of its grocery business unit from 2008 to 2010. Prior to that, Mr. Hsu served as President and Chief Operating Officer, Foodservice at H. J. Heinz Company. Mr. HsuHe also serves on the board of trusteesdirectors of United Way U.S.A.Texas Instruments Incorporated.
Sandra MacQuillanR.A. Karrmann, 51,57, was elected Senior Vice President and Chief Supply ChainHuman Resources Officer in 2015.2020. She is responsiblefor procurement, manufacturing, logistics, quality, safetythe design and sustainability.implementation of all human capital strategies for Kimberly-Clark, including global compensation and benefits, talent management, inclusion, equity and diversity organizational effectiveness and labor/employee relations. Ms. MacQuillanKarrmann joined Kimberly-Clark from Mars IncorporatedTenet Healthcare Corporation, a diversified healthcare services company, where she served from 2009 to 2015 as GlobalExecutive Vice President Supply Chain, responsibleand Chief Human Resources Officer since 2019 and Senior Vice President and Chief Human Resources Officer since 2017. Prior to joining Tenet, she served as Senior Vice President and Chief Human Resources Officer for manufacturing, engineeringUnited Surgical Partners International, which operates surgical facilities, since 2013.
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| 11 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Alison Lewis, 55, was elected Chief Growth Officer in 2019. Ms. Lewis joined Kimberly-Clark from Johnson & Johnson, where she served as Chief Marketing Officer of the Global Consumer business since 2013. Prior to her role at Johnson & Johnson, Ms. Lewis served as Chief Marketing Officer, Senior Vice President, North America at The Coca-Cola Company.
Robert Long, 65, was elected Chief Research and logisticsDevelopment Officer in 2021. He has global responsibility for Mars’the company's research and development, quality and regulatory functions, and is charged with accelerating growth through innovation that addresses opportunities to elevate Kimberly-Clark’s trusted brands. Mr. Long joined Kimberly-Clark from the Coca-Cola Company where he served in multiple roles of increasing responsibility, most recently as Senior Vice President for Global Petcare business.R&D and Chief Innovation Officer from 2016 to March 2021.
Jeffrey P. Melucci, 47,52, was elected Chief Business Development and Legal Officer in November 2020. From April 2020 to November 2020, he served as Senior Vice President, Business Development and General Counsel and from September 2017 to April 2020, he served as Senior Vice President - General Counsel in September 2017.Counsel. From January 2017 to September 2017, he served as Vice President, Senior Deputy General Counsel and General Counsel of Kimberly-Clark’s Global Operations. From March 2013 to January 2017, he served as Vice President and Deputy General Counsel. He also served as Chief Transformation Officer from November 2020 to October 2021, Corporate Secretary from April 2014 to September 2017 and General Counsel of Kimberly-Clark International from March 2013 to December 2016. Mr. Melucci joined Kimberly-Clark from General Electric, where he served in multiple roles of increasing responsibility, most recently as General Counsel - Aviation Systems and Aviation Business Development.
Anthony J. PalmerPaula S. Vaz Ramos, 58, 43, was elected Chief Strategy and Transformation Officer in October 2021. From March 2021 to October 2021 she served as Chief Strategy Officer. She has global responsibility for our enterprise strategy and transformation activities. Ms. Ramos joined Kimberly-Clark from McKinsey & Company where she served in multiple roles of increasing responsibility over 18 years, most recently as a Partner.
Russell Torres, 51, was elected Group President, - GlobalK-C North America in 2021. He is responsible for our consumer business in North America. From 2020 to 2021, he served as President of K-C Professional. Mr. Torres joined Kimberly-Clark from Newell Brands Inc., a consumer goods company, where he served as Group President since 2018 and Innovationas Chief Transformation Officer from 2016 to 2018. Prior to joining Newell Brands, Mr. Torres was a partner at Bain & Company from 2013 to 2016. Prior to that, Mr. Torres served as a senior executive at Mondelēz International in 2012. Previously,its North America Business Unit from 2011 to 2013.
Nelson Urdaneta, 50, was elected Senior Vice President and Chief Financial Officer in April 2022. Prior to joining Kimberly-Clark, he served as Senior Vice President, Treasurer at Mondelēz International since September 2021. Mr. Urdaneta joined Mondelēz in 2005 and served in multiple roles of increasing responsibility, including Senior Vice President, Corporate Controller and Chief MarketingAccounting Officer from 2006 to 2012. He leads the global development of our consumer categories through marketing, innovation, category and customer development and shopper marketing. In addition, he leads our global marketing, innovation and corporate research and development functions.Vice President Finance, Asia Pacific. Prior to joining Kimberly-Clark in 2006,Mondelēz, he served in a number of senior marketingwas the Director, Financial Planning and general management rolesAnalysis at Kellogg Company from 2002 to 2006, including as Managing Director of Kellogg's United Kingdom business. He also serves on the board of directors of The Hershey Company.Ryder System, Inc.
Kimberly K. UnderhillGonzalo Uribe, 53,51, was elected President, of K-C ProfessionalLatin America in 2014. From 2011 to 2014, she served as President, Consumer Europe. She2020. He is responsible for our global professionalconsumer business which includes commercial tissuein our Latin America region. From 2018 to 2020 he served as Vice President, North Latin America and wipers, skin care, safety and do-it-yourself products. Shefrom 2017 to 2018 he served as Vice President, Andean Region. Mr. Uribe joined Kimberly-Clark from Mondelēz International, where he served in 1988multiple roles of increasing responsibility, most recently as Western Andean, Central America and hasCaribbean General Manager.
Tristram Wilkinson, 54, was elected President, K-C Asia Pacific in 2021. He is responsible for our consumer business in our Asia Pacific region. From 2018 to 2021, he served as President, K-C EMEA. From 2016 to 2018, he served as Vice President and Managing Director, Central & Eastern Europe. Prior to that, Mr. Wilkinson held a number of positions withof increasing responsibility within researchour EMEA operations, including Vice President and engineering, operations and marketing. She also serves on the board of directors of Foot Locker, Inc.
Managing Director, United Kingdom & Ireland. Mr. Wilkinson joined Kimberly-Clark in 1995.
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| 812 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
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ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Kimberly-Clark common stock is listed on the New York Stock Exchange. The dividend and market price data included in Item 7, MD&A "Unaudited Quarterly Data," are incorporated in this Item 5 by reference.ticker symbol is KMB.
Quarterly dividends have been paid continually since 1935. Dividends have been paid on or about the second business day of January, April, July and October.
Kimberly-Clark common stock is listed on the New York Stock Exchange. The ticker symbol is KMB.
As of February 1, 2018,January 31, 2023, we had 20,540 16,810 holders of record of our common stock.
For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Form 10-K.
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During 2017,2022, we repurchased 7.2 million779 thousand shares of our common stock at a cost of $900$100 through a broker in the open market.
The following table contains information for shares repurchased during the fourth quarter of 2017.2022. None of the shares in this table were repurchased directly from any of our officers or directors.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) |
| October 1 to October 31 | | 71,600 | | | $ | 115.67 | | | 38,960,781 | | | 41,039,219 | |
| November 1 to November 30 | | 81,900 | | | 128.85 | | | 39,042,681 | | | 40,957,319 | |
| December 1 to December 31 | | 46,200 | | | 137.06 | | | 39,088,881 | | | 40,911,119 | |
| Total | | 199,700 | | | | | | | |
(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.
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| | | | | | | | | | | | | |
| Period (2017) | | 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 |
| October 1 to October 31 | | 350,000 |
| | $ | 115.44 |
| | 16,375,346 |
| | 23,624,654 |
|
| November 1 to November 30 | | 340,400 |
| | 114.59 |
| | 16,715,746 |
| | 23,284,254 |
|
| December 1 to December 31 | | 172,100 |
| | 119.49 |
| | 16,887,846 |
| | 23,112,154 |
|
| Total | | 862,500 |
| | | | | | |
| |
(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. |
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| 913 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
ITEM 6. SELECTED FINANCIAL DATA
Intentionally Omitted
| |
ITEM 6. | SELECTED FINANCIAL DATA |
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31 |
| | 2017(a) | | 2016(b) | | 2015(c) | | 2014(d) | | 2013(e) |
| Net Sales | $ | 18,259 |
| | $ | 18,202 |
| | $ | 18,591 |
| | $ | 19,724 |
| | $ | 19,561 |
|
| Gross Profit | 6,553 |
| | 6,651 |
| | 6,624 |
| | 6,683 |
| | 6,609 |
|
| Operating Profit | 3,299 |
| | 3,317 |
| | 1,613 |
| | 2,521 |
| | 2,903 |
|
| Share of Net Income of Equity Companies | 104 |
| | 132 |
| | 149 |
| | 146 |
| | 205 |
|
| Income from Continuing Operations | 2,319 |
| | 2,219 |
| | 1,066 |
| | 1,545 |
| | 2,018 |
|
| Income from Discontinued Operations, Net of Income Taxes | — |
| | — |
| | — |
| | 50 |
| | 203 |
|
| Net Income | 2,319 |
| | 2,219 |
| | 1,066 |
| | 1,595 |
| | 2,221 |
|
| Net Income Attributable to Noncontrolling Interests in Continuing Operations | (41 | ) | | (53 | ) | | (53 | ) | | (69 | ) | | (79 | ) |
| Net Income Attributable to Kimberly-Clark Corporation | 2,278 |
| | 2,166 |
| | 1,013 |
| | 1,526 |
| | 2,142 |
|
| Per Share Basis | | | | | | | | | |
| Net Income Attributable to Kimberly-Clark Corporation | | | | | | | | | |
| Basic | | | | | | | | | |
| Continuing operations | 6.44 |
| | 6.03 |
| | 2.78 |
| | 3.94 |
| | 5.05 |
|
| Discontinued operations | — |
| | — |
| | — |
| | 0.13 |
| | 0.53 |
|
| Net income | 6.44 |
| | 6.03 |
| | 2.78 |
| | 4.07 |
| | 5.58 |
|
| | | | | | | | | | |
| Diluted | | | | | | | | | |
| Continuing operations | 6.40 |
| | 5.99 |
| | 2.77 |
| | 3.91 |
| | 5.01 |
|
| Discontinued operations | — |
| | — |
| | — |
| | 0.13 |
| | 0.52 |
|
| Net income | 6.40 |
| | 5.99 |
| | 2.77 |
| | 4.04 |
| | 5.53 |
|
| | | | | | | | | | |
| Cash Dividends | | | | | | | | | |
| Declared | 3.88 |
| | 3.68 |
| | 3.52 |
| | 3.36 |
| | 3.24 |
|
| Paid | 3.83 |
| | 3.64 |
| | 3.48 |
| | 3.33 |
| | 3.17 |
|
| | | | | | | | | | |
| Total Assets | 15,151 |
| | 14,602 |
| | 14,842 |
| | 15,526 |
| | 18,919 |
|
| Long-Term Debt | 6,472 |
| | 6,439 |
| | 6,106 |
| | 5,630 |
| | 5,386 |
|
| Total Stockholders' Equity | 882 |
| | 117 |
| | 40 |
| | 999 |
| | 5,140 |
|
| |
(a) | Results include other expense of $24 and an income tax benefit of $85 for 2017 U.S. tax reform and related matters. See Item 8, Notes 4 and 11 to the consolidated financial statements for details. |
| |
(b) | Results include other income of $11 related to an updated assessment of the deconsolidation of our Venezuelan operations. Additionally, results were negatively impacted by pre-tax charges of $35, $27 after tax, related to the 2014 Organization Restructuring. See Item 8, Notes 1 and 2 to the consolidated financial statements for details. |
| |
(c) | Results include pre-tax charges related to pension settlements of $1,358, $835 after tax, a $45 nondeductible charge related to the remeasurement of the Venezuelan balance sheet and a pre-tax charge of $108, $102 after tax, related to the deconsolidation of our Venezuelan operations. Additionally, results were negatively impacted by pre-tax charges of $63, $42 after tax, related to the 2014 Organization Restructuring, and nondeductible charges of $23 related to the restructuring of operations in Turkey. Also included is an income tax charge of $49 related to prior years as a result of an updated assessment of uncertain tax positions in certain of our international operations. See Item 8, Notes 1, 2, 6 and 11 to the consolidated financial statements for details. |
| |
(d) | Results include pre-tax charges of $133, $95 after tax, related to the 2014 Organization Restructuring, pre-tax charges of $33, $30 after tax, related to European strategic changes, a nondeductible charge of $462 related to the remeasurement of the Venezuelan balance sheet and a nondeductible charge of $35, $17 attributable to Kimberly-Clark Corporation, related to a regulatory dispute in the Middle East. Additionally, results were negatively impacted by pre-tax charges of $157, $138 after tax, for transaction and related costs associated with the spin-off of the health care business (classified in discontinued operations). |
| |
(e) | Results include pre-tax charges of $81, $66 after tax, related to European strategic changes. Additionally, results were negatively impacted by a $36 pre-tax charge, $26 after tax, related to the devaluation of the Venezuelan bolivar. |
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| 1014 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
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ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
This MD&A is intended to provide investors with an understanding of our recent performance, financial condition and prospects. This discussion and analysis compares 20172022 results to 2016, and 20162021. For a discussion that compares our 2021 results to 2015.2020, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K. The reference to "N.M." indicates that the calculation is not meaningful. In addition, we provide commentary regarding organic sales growth, which describes the impact of changes in volume, product mix and net selling prices on net sales. Changes in foreign currency exchange rates, and acquisitions and divestituresexited businesses also impact the year-over-year change in net sales. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
The following will be discussed and analyzed:
•Overview of Business
•Overview of 20172022 Results
•Business Environment and Trends
•Results of Operations and Related Information
Unaudited Quarterly Data
•Liquidity and Capital Resources
•Critical Accounting Policies and Use of Estimates
Legal Matters
•New Accounting Standards
Business Outlook
•Information Concerning Forward-Looking Statements
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 to 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 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 items for the relevant time periods as indicated in the reconciliations included later in this MD&A:
U.S. Tax Reform Related Matters•Pension settlements - In 2022, pension settlement charges were recognized related to lump-sum distributions from pension plan assets exceeding the fourthtotal of annual service and interest costs resulting in a recognition of deferred actuarial losses.
•Acquisition of controlling interest in Thinx – In the first quarter of 2017,2022, we recognizedincreased our investment in Thinx. As a result of this transaction, a net benefit as a resultwas recognized, primarily due to the non-recurring, non-cash gain recognized related to the remeasurement of U.S. tax reform and related activities.
2014 Organization Restructuring - In 2014, we initiated this restructuring in order to improve organization efficiency and offset the impact of stranded overhead costs resulting from the 2014 spin-offcarrying value of our health care business. As a result, we recognized restructuring charges in 2014, 2015previously held equity investment to fair value partially offset by transaction and 2016. Restructuring actions were completed by December 31, 2016.integration costs. See Item 8, Note 23 to the consolidated financial statements for details.
Adjustments Related•2018 Global Restructuring Program - In 2018, we initiated a restructuring program to Venezuelan Operations - Resultsreduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. The restructuring actions were completed in 2016 and 2015 include adjustments for the deconsolidation of our Venezuelan operations, and in 2015 include charges for remeasuring the local currency balance sheet in Venezuela.2021. See Item 8, Note 12 to the consolidated financial statements for details.
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| 1115 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
Pension Settlement Charges - In 2015, we recorded settlement-related charges from certain actions taken for our U.S. pension plan. See Item 8, Note 6 to the consolidated financial statements for details.
Uncertain Tax Positions Adjustment - In 2015, we updated our assessment of uncertain tax positions for certain international operations, and recorded a charge related to prior years in provision for income taxes. See Item 8, Note 11 to the consolidated financial statements for details.
Turkey Restructuring - In 2015, we recorded charges related to the restructuring of our operations in Turkey.
Overview of Business
We are a global company focused on leading the world in essentialsdelivering products and solutions that provide better care for a better life, world, with manufacturing facilities in 3633 countries, including our equity affiliates, and products sold in more than 175 countries.countries and territories. Our products are sold under well-known brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. We have three reportable business segments: Personal Care, Consumer Tissue and KCP.K-C Professional. These business segments are described in greater detail in Item 8, Note 1315 to the consolidated financial statements.
In operating our business, we seek to:
manage•grow our portfolio of brands through innovation, category development and commercial execution,
•leverage our cost and financial discipline to balancefund growth profit margin and cash flow,improve margins, and
invest•allocate capital in our brands, innovation and growth initiatives,
deliver sustainable cost reductions, and
provide disciplined capital management to improve return on invested capital and return cash to shareholders.value-creating ways.
We describe our business outside North America in two groups – Developing and Emerging Markets ("D&E") and Developed Markets. Developing and EmergingD&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.
HighlightsOn February 24, 2022, we completed our acquisition of a majority and controlling share of Thinx, an industry leader in the reusable period and incontinence underwear category, for 2017 includetotal consideration of $181 consisting of cash of $53, the following:fair value of our previously held equity investment of $127, and certain share-based award costs of $1. See Item 8, Note 3 to the consolidated financial statements for details.
On October 24, 2022, we entered into an agreement to sell our Neve tissue brand and related consumer and K-C Professional tissue assets in Brazil for $175, subject to certain working capital and other closing adjustments. The transaction also includes a licensing agreement to allow the acquirer to manufacture and market in Brazil the Kleenex, Scott and Wypall brands to consumers and away-from-home customers for a period of time. The transaction is pending customary conditions and regulatory approval and is expected to close in the first half of 2023. The assets included in the sale agreement have been reclassified to Other current assets as of December 31, 2022.
Overview of 2022 Results
•Net sales of $18.3$20.2 billion increased slightly compared to 2016. Favorable4 percent. Organic sales increased 7 percent, while changes in foreign currency exchange rates benefiteddecreased sales by less than 14 percent.
•In North America, organic sales were down 2increased 5 percent in consumer products and similar year-on-yearincreased 9 percent in K-C Professional.
•Outside North America, organic sales increased 38 percent in developingD&E Markets and emerging markets but fell 3increased 10 percent in developed markets.Developed Markets.
We achieved $450 of cost savings from our ongoing FORCE (Focused On Reducing Costs Everywhere) program.•Operating Profit and Net Income Attributable to Kimberly-Clark were $2,681 and $1,934 in 2022, respectively.
•Diluted earnings per share were $6.40$5.72 in 20172022 compared to $5.99$5.35 in 2016, including2021. Results in 2022 include pension settlement charges of $0.12 and a net benefit fromof $0.20 associated with the 2017 U.S. tax reformacquisition of Thinx, 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. Results in 2021 include net charges of $0.83 related matters.to the 2018 Global Restructuring Program.
•We continuedcontinue to focus on generating cash flow and allocating capital to shareholders. Cash provided by operations was $2.7 billion in 2022. We raised our dividend in 20172022 by 5.42 percent, the 45th50th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 20172022 amounted to $2.3$1.7 billion.
In 2023, we plan to continue to execute our strategies for long-term success which include delivering balanced, sustainable growth by growing our brands in-line with or ahead of category growth, leveraging our cost and financial discipline to fund growth and improve margins, and allocating capital in value-creating ways. Our growth strategy is built on two pillars. Elevate our core business is our first pillar and is driven by delivering value-added innovations and driving category opportunities. Expanding our markets is our second pillar and emphasizes Personal Care. Both strategies are enabled by our focus on
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| 16 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
accelerating and investing in our commercial capabilities through digital marketing, revenue growth management, consumer-inspired innovation and strong in-market execution.
Our strong legacy of financial discipline supports our growth strategy by driving ongoing supply chain productivity through our FORCE (Focused On Reducing Costs Everywhere) program, controlling discretionary spending, driving down working capital and maintaining the top-tier return on invested capital. Our capital allocation strategy is consistent with our historical approach of disciplined capital spending, payment of a top tier dividend, evaluation of acquisition opportunities and allocation of excess cash flow to share repurchases.
We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" in this Form 10-K for additional information.
OverviewBusiness Environment and Trends
Our results of 2017 Resultsoperations have been, and we expect them to continue to be, affected by the following factors and key trends, which may cause our future results of operations to differ from our historical results discussed under “Results of Operations and Related Information.”
NetCOVID-19 - The macro business environment experienced unprecedented volatility in recent years related to the continuing effect the global COVID-19 pandemic has had on supply and demand dynamics.
We participate in fixed consumption categories where demand is generally very stable. In recent years, our sales have fluctuated, especially in Consumer Tissue and K-C Professional, because of COVID-19-related demand spikes, inventory destocking, and consumer usage pattern disruption. Additionally, consumer incomes have generally been impacted negatively by the pandemic which can impact their purchasing patterns. COVID-19 outbreaks and patterns are difficult to predict.
The pandemic has significantly disrupted supply chains across the globe. A steep drop in aggregate demand at the beginning of the pandemic caused aggregate supply to sharply contract. When demand for goods resumed at the end of 2020, supply shortages led to record levels of inflation in commodities and other costs. In addition to inflation, logistics and distribution networks, especially in the U.S., have been severely impacted by container and truck shortages and significant labor supply issues. These effects have caused challenges getting input materials into our production facilities, production delays, and delays and meaningfully higher costs to get products from our production facilities to our customers. The net effect of the global supply chain disruption led to an unprecedented increase in costs in 2022 and 2021. The underlying causes of the disruption and higher costs will take time to be resolved.
Birth Rate Trends - Sales of our baby and child care products are highly correlated with birth rate trends. In recent years, birth rate declines in key countries, including China, South Korea and the U.S., have pressured category volume growth rates. To help mitigate the effects of birth rate declines, we aim to drive sales growth at or ahead of category growth rates through innovation, premiumization, strong brand building plans and digital marketing investment as part of our Elevate and Expand growth strategy.
Competition - Our products are sold in a highly competitive global marketplace. Our competitors include global, regional and local manufacturers, including private label manufacturers which offer products that are typically sold at lower prices. In particular, private label market share has been increasing in the tissue category. Increased purchases of private label products could reduce net sales of $18.3 billionour higher-margin products which would negatively impact our profitability. While the global marketplace in which we operate has always been highly competitive, we continue to experience increased slightly comparedconcentration and the growing presence of large-format retailers, discounters and e-tailers. This market environment has resulted in increased pressure on pricing and other competitive factors, and we expect these pressures to prior year,continue in the coming year.
Pricing - Our net sales growth and profitability may be affected as we adjust prices to address market conditions. We adjust our product prices based on a number of variables including demand, the competitive environment, technological improvements and changes in our raw material, distribution, energy and other input costs. We increased our prices in 2022 in response to continuing inflation related to the ongoing impacts of the COVID-19 pandemic and other market conditions, including the war in Ukraine. In 2023, we anticipate challenging market conditions to continue to impact pricing. Price changes may affect net sales, earnings and market share in the near term as the market adjusts to new pricing and other market conditions.
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| 17 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Operating Costs - Our operating costs include raw materials, labor, selling, general and administrative expenses, taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, and pricing actions. To remain competitive on our operating structure, we continue to work on programs to expand our profitability, such as our FORCE program. In 2022, our results were impacted by an unprecedented increase in our costs, particularly for pulp, resin, distribution and energy, primarily related to COVID-19 pandemic driven effects and the effects of the war in Ukraine. We expect the higher cost environment will continue in 2023.
Evolving Consumer Product and Shopping Preferences - The retail landscape in many of our markets continues to evolve due to the rapid growth of eCommerce retailers, changing consumer preferences (as consumers increasingly shop online) and the increased presence of alternative retail channels, such as subscription services and direct-to-consumer businesses. Changing consumer preferences also include increased concerns in regard to post-consumer waste and packaging materials and their impact on environmental sustainability. If we experience lower sales due to changes in consumer demand for our products, our earnings could decrease. We believe our strategic growth focus, sustainability initiatives and continued investment in eCommerce capabilities has us well positioned relative to these changing dynamics.
Volatility of Global Markets - Our growth strategy depends in part on our ability to expand our operations, including in D&E Markets. Some D&E Markets have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions. Volatility in these markets affects our production costs and the demand for our products. Volatility in global consumer, commodity and foreign currency exchange rates benefitedincreased significantly over the past few years and is expected to continue in the near term.
Climate Change - We operate in many regions around the world where our businesses could be disrupted by climate change. Our climate change risk categories include risks related to the transition to a lower-carbon economy (“Transition Risks”) and risks related to the physical impacts of climate change (“Physical Risks”). Transition Risks include increased costs of carbon emission, increased cost to produce products in compliance with future regulations, increased raw materials cost, shifts in customer/consumer values and other legal, regulatory and technological risks. Physical Risks include the risk of direct damage to assets or supply chain disruption caused by severe weather events such as floods, storms, wildfires and droughts. We continue to progress toward our 2030 Sustainability Goals which include elements that aim for reductions in greenhouse gas emissions, use of natural forest fibers, use of plastics and use of water in water-stressed regions.
War in Ukraine - Beginning in March 2022, we have implemented significant adjustments to our business in Russia. We have substantially curtailed media, advertising and promotional activity and suspended capital investments in our sole manufacturing facility in Russia. Consistent with the humanitarian nature of our products, we manufacture and sell only essential items in Russia, such as baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies. Our Russia business has represented approximately 1 to 2 percent of our net global sales, by less than 1 percent.
Operatingoperating profit and Net Income Attributabletotal assets. Our ability to Kimberly-Clark Corporation were $3,299continue our operations in Russia may change as the situation evolves. Our business in Russia is experiencing increased input costs, supply chain complexities, reduced consumer demand and $2,278 in 2017restricted access to financial institutions, as well as increased monetary, currency and $3,317payment controls. We are actively monitoring the situation, and $2,166 in 2016, respectively.
Diluted earnings per share were $6.40 in 2017 comparedas the business, geopolitical and regulatory environment concerning Russia evolves, we may not be able to $5.99 in 2016. Results in 2017 included a net benefitsustain the limited manufacture and sale of $0.17our products, and our assets may be partially or fully impaired. We are also monitoring the increased risk of cyber-based attacks as a result of U.S. tax reformthe war in Ukraine and related activities.
have implemented additional cybersecurity measures designed to address the evolving threat landscape.
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| 1218 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
Results of Operations and Related Information
This section presents a discussion and analysis of net sales, operating profit and other information relevant to an understanding of 20172022 results of operations.
Consolidated
| | | | | | | | | | | | | | | | | | | | | |
| Selected Financial Results | Year Ended December 31 | | | | |
| 2022 | | 2021 | | Change
2022 vs. 2021 | | | | |
| Net Sales: | | | | | | | | | |
| North America | $ | 10,663 | | | $ | 10,052 | | | +6 | % | | | | |
| Outside North America | 9,799 | | | 9,697 | | | +1 | % | | | | |
| Intergeographic sales | (287) | | | (309) | | | -7 | % | | | | |
| Total Net Sales | 20,175 | | | 19,440 | | | +4 | % | | | | |
| Operating Profit: | | | | | | | | | |
| North America | 2,071 | | | 2,066 | | | — | | | | | |
| Outside North America | 979 | | | 1,082 | | | -10 | % | | | | |
Corporate & Other(a) | (412) | | | (559) | | | N.M. | | | | |
Other (income) and expense, net(a) | (43) | | | 28 | | | N.M. | | | | |
| Total Operating Profit | 2,681 | | | 2,561 | | | +5 | % | | | | |
| Provision for income taxes | (495) | | | (479) | | | +3 | % | | | | |
| Share of net income of equity companies | 116 | | | 98 | | | +18 | % | | | | |
| Net Income Attributable to Kimberly-Clark Corporation | 1,934 | | | 1,814 | | | +7 | % | | | | |
| Diluted Earnings per Share | 5.72 | | | 5.35 | | | +7 | % | | | | |
|
| | | | | | | | | | | | | | | | | |
| Selected Financial Results | Year Ended December 31 |
| | 2017 | | 2016 | | Change 2017 vs. 2016 | | 2015 | | Change 2016 vs. 2015 |
| Net Sales: | | | | | | | | | |
| North America | $ | 9,390 |
| | $ | 9,545 |
| | -2 | % | | $ | 9,531 |
| | — |
|
| Outside North America | 9,186 |
| | 8,964 |
| | +2 | % | | 9,458 |
| | -5 | % |
| Intergeographic sales | (317 | ) | | (307 | ) | | +3 | % | | (398 | ) | | -23 | % |
| Total Net Sales | 18,259 |
| | 18,202 |
| | — |
| | 18,591 |
| | -2 | % |
| Operating Profit: | | | | | | | | | |
| North America | 2,283 |
| | 2,322 |
| | -2 | % | | 2,180 |
| | +7 | % |
| Outside North America | 1,291 |
| | 1,255 |
| | +3 | % | | 1,368 |
| | -8 | % |
Corporate & Other(a) | (248 | ) | | (252 | ) | | N.M. |
| | (367 | ) | | N.M. |
|
Other (income) and expense, net(a) | 27 |
| | 8 |
| | N.M. |
| | 1,568 |
| | N.M. |
|
| Total Operating Profit | 3,299 |
| | 3,317 |
| | -1 | % | | 1,613 |
| | +106 | % |
| Provision for income taxes | (776 | ) | | (922 | ) | | -16 | % | | (418 | ) | | +121 | % |
| Share of net income of equity companies | 104 |
| | 132 |
| | -21 | % | | 149 |
| | -11 | % |
| Net Income Attributable to Kimberly-Clark Corporation | 2,278 |
| | 2,166 |
| | +5 | % | | 1,013 |
| | +114 | % |
| Diluted Earnings per Share | 6.40 |
| | 5.99 |
| | +7 | % | | 2.77 |
| | +116 | % |
| |
(a) | Corporate & Other and Other (income) and expense, net includes income and expenses not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations. |
GAAP to Non-GAAP Reconciliations of Selected Financial Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended December 31, 2022 |
| | As
Reported | | Acquisition of Controlling Interest in Thinx | | Pension Settlements | | | | | | | As
Adjusted
Non-GAAP |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Marketing, research and general expenses | | $ | 3,581 | | | $ | 21 | | | $ | — | | | | | | | | $ | 3,560 | |
| Other (income) and expense, net | | (43) | | | (85) | | | — | | | | | | | | 42 | |
| Operating Profit | | 2,681 | | | 64 | | | — | | | | | | | | 2,617 | |
| Nonoperating expense | | (73) | | | — | | | (52) | | | | | | | | (21) | |
| | | | | | | | | | | | | |
| Provision for income taxes | | (495) | | | 4 | | | 13 | | | | | | | | (512) | |
| Effective tax rate | | 21.2 | % | | — | | | — | | | | | | | | 22.0 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net Income Attributable to Kimberly-Clark Corporation | | 1,934 | | | 68 | | | (39) | | | | | | | | 1,905 | |
Diluted Earnings per Share(a) | | 5.72 | | | 0.20 | | | (0.12) | | | | | | | | 5.63 | |
|
| | | | | | | | | | | | |
| | | Twelve Months Ended December 31, 2017 |
| | | As Reported | | U.S. Tax Reform Related Matters | | As Adjusted Non-GAAP |
| Other (income) and expense, net | | $ | 27 |
| | $ | 24 |
| | $ | 3 |
|
| Operating Profit | | 3,299 |
| | (24 | ) | | 3,323 |
|
| Income before income taxes and equity interests | | 2,991 |
| | (24 | ) | | 3,015 |
|
| Provision for income taxes | | (776 | ) | | 85 |
| | (861 | ) |
| Effective tax rate | | 25.9 | % | | — |
| | 28.6 | % |
| Net Income Attributable to Kimberly-Clark Corporation | | 2,278 |
| | 61 |
| | 2,217 |
|
| Diluted Earnings per Share | | 6.40 |
| | 0.17 |
| | 6.23 |
|
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| 1319 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
|
| | | | | | | | | | | | | | | | |
| | | Twelve Months Ended December 31, 2016 |
| | | As Reported | | Charges for 2014 Organization Restructuring | | Adjustment Related to Venezuelan Operations | | As Adjusted Non-GAAP |
| Cost of products sold | | $ | 11,551 |
| | $ | 6 |
| | $ | — |
| | $ | 11,545 |
|
| Marketing, research and general expenses | | 3,326 |
| | 32 |
| | — |
| | 3,294 |
|
| Other (income) and expense, net | | 8 |
| | (3 | ) | | (11 | ) | | 22 |
|
| Operating Profit | | 3,317 |
| | (35 | ) | | 11 |
| | 3,341 |
|
| Income before income taxes and equity interests | | 3,009 |
| | (35 | ) | | 11 |
| | 3,033 |
|
| Provision for income taxes | | (922 | ) | | 8 |
| | — |
| | (930 | ) |
| Effective tax rate | | 30.6 | % | | — |
| | — |
| | 30.7 | % |
| Net Income Attributable to Kimberly-Clark Corporation | | 2,166 |
| | (27 | ) | | 11 |
| | 2,182 |
|
| Diluted Earnings per Share | | 5.99 |
| | (0.07 | ) | | 0.03 |
| | 6.03 |
|
| | | | | Twelve Months Ended December 31, 2015 | | Twelve Months Ended December 31, 2021 |
| | | As Reported | | Charges Related to Venezuelan Operations | | Uncertain Tax Positions Adjustment | | Charges for Pension Settlements | | Charges for 2014 Organization Restructuring | | Charges for Turkey Restructuring | | As Adjusted Non-GAAP | | As
Reported | | 2018 Global Restructuring Program | | As
Adjusted
Non-GAAP |
| Cost of products sold | | $ | 11,967 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 23 |
| | $ | 22 |
| | $ | 11,917 |
| Cost of products sold | | $ | 13,452 | | | $ | 154 | | | $ | 13,298 | |
| Gross Profit | | Gross Profit | | 5,988 | | | (154) | | | 6,142 | |
| Marketing, research and general expenses | | 3,443 |
| | — |
| | — |
| | — |
| | 40 |
| | 1 |
| | 3,402 |
| Marketing, research and general expenses | | 3,399 | | | 111 | | | 3,288 | |
| Other (income) and expense, net | | 1,568 |
| | 148 |
| | — |
| | 1,358 |
| | — |
| | — |
| | 62 |
| Other (income) and expense, net | | 28 | | | 10 | | | 18 | |
| Operating Profit | | 1,613 |
| | (153 | ) | | — |
| | (1,358 | ) | | (63 | ) | | (23 | ) | | 3,210 |
| Operating Profit | | 2,561 | | | (275) | | | 2,836 | |
Income before income taxes and equity interests | | 1,335 |
| | (153 | ) | | — |
| | (1,358 | ) | | (63 | ) | | (23 | ) | | 2,932 |
| |
| Nonoperating expense | | Nonoperating expense | | (86) | | | (79) | | | (7) | |
| | Provision for income taxes | | (418 | ) | | 6 |
| | (49 | ) | | 523 |
| | 21 |
| | — |
| | (919 | ) | Provision for income taxes | | (479) | | | 75 | | | (554) | |
| Effective tax rate | | 31.3 | % | | — |
| | — |
| | — |
| | — |
| | — |
| | 31.3 | % | Effective tax rate | | 21.5 | % | | — | | | 21.5 | % |
| Share of net income of equity companies | | Share of net income of equity companies | | 98 | | | (7) | | | 105 | |
| Net income attributable to noncontrolling interests | | Net income attributable to noncontrolling interests | | (30) | | | 5 | | | (35) | |
| Net Income Attributable to Kimberly-Clark Corporation | | 1,013 |
| | (147 | ) | | (49 | ) | | (835 | ) | | (42 | ) | | (23 | ) | | 2,109 |
| Net Income Attributable to Kimberly-Clark Corporation | | 1,814 | | | (281) | | | 2,095 | |
Diluted Earnings per Share(a) | | 2.77 |
| | (0.40 | ) | | (0.13 | ) | | (2.28 | ) | | (0.11 | ) | | (0.06 | ) | | 5.76 |
| Diluted Earnings per Share(a) | | 5.35 | | | (0.83) | | | 6.18 | |
(a) "As Adjusted Non-GAAP" doesmay not equal "As Reported" plus adjustments"Adjustments" as a result of rounding.
Analysis of Consolidated Results |
| | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | Adjusted Operating Profit | | Percent Change |
| | | 2017 vs. 2016 | | 2016 vs. 2015 | | | | 2017 vs. 2016 | | 2016 vs. 2015 |
| Volume | | 1 |
| | 2 |
| | Volume | | 1 |
| | 5 |
|
| Net Price | | (1 | ) | | — |
| | Net Price | | (8 | ) | | (1 | ) |
| Mix/Other | | — |
| | — |
| | Input Costs | | (11 | ) | | 2 |
|
| Currency | | 1 |
| | (4 | ) | | Cost Savings | | 13 |
| | 14 |
|
Total(a) | | — |
| | (2 | ) | | Currency Translation | | 1 |
| | (3 | ) |
| | | | | | | Other(c) | | 3 |
| | (13 | ) |
Organic(b) | | — |
| | 2 |
| | Total | | (1 | ) | | 4 |
|
| |
(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) | Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | | | Adjusted Operating Profit | | Percent Change | | |
| | 2022 vs. 2021 | | | | | | 2022 vs. 2021 | | |
| Volume | | (3) | | | | | Volume | | (9) | | | |
| Net Price | | 9 | | | | | Net Price | | 59 | | | |
| Mix/Other | | 1 | | | | | Input Costs | | (52) | | | |
| Currency | | (4) | | | | | Cost Savings(c) | | 10 | | | |
Total(a) | | 4 | | | | | Currency Translation | | (3) | | | |
| | | | | | Other(d) | | (13) | | | |
Organic(b) | | 7 | | | | | Total | | (8) | | | |
(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.
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| 14 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
(b) Combined impact of changes in volume, net price and mix/other.
2017 vs. 2016(c) Benefits of the FORCE program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
Net sales of $18.3$20.2 billion were up slightlyincreased 4 percent compared to the year-agoyear ago period. Favorable foreign currency rates benefited sales by less than 1 percent. Organic sales were similar year-on-year, as sales volumes increased about 1 percent. Changes in product mix increased sales slightly, while changes in net selling prices decreased sales by more than 1 percent. Operating profit was $3,299$2,681 in 20172022 and $3,317$2,561 in 2016.2021. Adjusted operating profit was $3,323$2,617 in 20172022 and $3,341$2,836 in 2016.2021. Results were impacted by lower net selling prices and $355$1.5 billion of higher input costs. The comparison benefited from volume growth, $450 of FORCE cost savings and lowercosts, higher marketing, research and general spending.expenses and unfavorable foreign currency effects. Results benefited from organic sales growth and $290 of FORCE savings.
Other (income) and expense, net was $43 of income in 2022, which primarily reflected the non-recurring, non-cash gain recognized upon the acquisition of a controlling interest in Thinx related to the remeasurement of the carrying value of our previously held equity investment to fair value. Other (income) and expense, net was $28 of expense in 2021. Adjusted other (income) and expense, net was $42 and $18 of expense in 2022 and 2021, respectively.
The effective tax rate of 25.921.2 percent in 2017 decreased2022 compared to 30.6the effective tax rate of 21.5 percent in 2016. The rate in 2017 included a net benefit as a result of U.S. tax reform and related activity. This amount included a net expense of $278 for the transition tax and a net benefit of $202 for the remeasurement of deferred taxes associated with the corporate rate reduction and our reassessment of permanently reinvested earnings. In addition, it included a net benefit of $152 for certain tax planning actions that were taken in the fourth quarter of 2017 in anticipation of the enactment of the Tax Act. See additional details in Item 8, Note 11 to the consolidated financial statements.2021. The adjusted effective tax rate was 28.622.0 percent in 2017 and 30.72022 compared to 21.5 percent in 2016.2021.
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| 20 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Our share of net income of equity companies was $104$116 in 20172022 and $132$98 in 2016. Kimberly-Clark de Mexico, S.A.B. de C.V. ("KCM") results in 20172021. Results were positively impacted by higher net selling prices partially offset by higher input costs partially offset by benefits from sales growth and cost savings.lower volumes.
Diluted earnings per share was $6.40 in 2017 and $5.99 in 2016 and adjusted earnings per share were $6.23 in 2017 and $6.03 in 2016. The change was driven by a lower share count and higher earnings.
2016 vs. 2015
Net sales of $18.2 billion decreased 2 percent compared to 2015, as changes in foreign currency exchange rates reduced sales by about 4 percent. Organic sales increased approximately 2 percent due to higher volumes. Operating profit was $3,317 in 2016 versus $1,613 in 2015. Results in 2015 included $1,358 of pension settlement charges and $153 of charges related to our Venezuelan operations. Adjusted operating profit of $3,341 in 2016 increased 4 percent compared to $3,210 in 2015. Results in 2016 included benefits from organic sales growth, $435 of FORCE cost savings and $70 of savings from the 2014 Organization Restructuring. In addition, input costs were $65 lower. Translation effects due to changes in foreign currency exchange rates lowered operating profit by $90 and transaction effects also negatively impacted results.
Adjusted other (income) and expense, net of $22 in 2016 decreased compared to $62 in 2015 due to higher currency transaction losses in 2015. The decrease in our effective tax rate of 30.6 percent in 2016 compared to 31.3 percent in 2015 is primarily due to certain planning initiatives. Our share of net income of equity companies was $132 in 2016 and $149 in 2015. KCM results in 2016 compared to 2015 were negatively impacted by a weaker Mexican peso and higher input costs, partially offset by benefits from organic sales growth and cost savings.
Diluted earnings per share were $5.99$5.72 in 20162022 and $2.77$5.35 in 2015. The increase in adjusted2021. Adjusted earnings per share of $6.03$5.63 in 20162022 decreased 9 percent compared to $5.76$6.18 in 20152021. The decrease was due to higher earnings andprimarily driven by lower share counts.
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| 15 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
adjusted operating profit.
Business Segments
Personal Care
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | | | | | 2022 | | 2021 | | |
| Net Sales | | $ | 10,622 | | | $ | 10,267 | | | | | Operating Profit | | $ | 1,787 | | | $ | 1,856 | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 | | | | 2017 | | 2016 | | 2015 |
| Net Sales | | $ | 9,078 |
| | $ | 9,046 |
| | $ | 9,204 |
| | Operating Profit | | $ | 1,907 |
| | $ | 1,857 |
| | $ | 1,885 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | | | Operating Profit | | Percent Change | | |
| | 2022 vs. 2021 | | | | | | 2022 vs. 2021 | | |
| Volume | | (3) | | | | | Volume | | (7) | | | |
| Net Price | | 8 | | | | | Net Price | | 45 | | | |
| Mix/Other | | 2 | | | | | Input Costs | | (34) | | | |
| Currency | | (3) | | | | | Cost Savings(c) | | 7 | | | |
Total(a) | | 3 | | | | | Currency Translation | | (3) | | | |
| | | | | | Other(d) | | (12) | | | |
Organic(b) | | 7 | | | | | Total | | (4) | | | |
(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding. |
| | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | Operating Profit | | Percent Change |
| | | 2017 vs. 2016 | | 2016 vs. 2015 | | | | 2017 vs. 2016 | | 2016 vs. 2015 |
| Volume | | 1 |
| | 4 |
| | Volume | | 2 |
| | 8 |
|
| Net Price | | (2 | ) | | (1 | ) | | Net Price | | (9 | ) | | (4 | ) |
| Mix/Other | | 1 |
| | — |
| | Input Costs | | (7 | ) | | 2 |
|
| Currency | | 1 |
| | (5 | ) | | Cost Savings | | 14 |
| | 14 |
|
Total(a) | | — |
| | (2 | ) | | Currency Translation | | 1 |
| | (3 | ) |
| | | | | | | Other(c) | | 2 |
| | (18 | ) |
Organic(b) | | (1 | ) | | 3 |
| | Total | | 3 |
| | (1 | ) |
| |
(a) | Total may not equal the sum of volume, net price, mix/other and currency due to rounding. |
| |
(b) | (b) Combined impact of changes in volume, net price and mix/other. |
| |
(c) | Includes the impact of changes in volume, net price and mix/other.(c) Benefits of the FORCE program. (d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs. |
2017 vs. 2016
Net sales of $9.1 billion was up slightly compared to 2016. Favorable currency rates and higher sales volumes increased sales by 1 percent each, while changes in net selling prices decreased sales by 2 percent. Operating profit of $1,907 increased 3 percent. The comparison benefited from volume growth, cost savings and reduced marketing, research and general spending, mostly offset by lower net selling prices and input cost inflation.
Net sales in North America decreased 2 percent. Changes in net selling prices reduced sales by more than 1 percent, including higher promotion spending in most categories, and volumes decreased slightly. Adult care volumes increased mid-single digits, including benefits from market growth and innovations on our Poise and Depend brands. On the other hand, volumes in the infant and child care mega-category were down low single digits. Although volumes increased in Pull-Ups training pants, Huggies diaper volumes were down, impacted by competitive activity and a lower U.S. birth rate.
Net sales in developing and emerging markets increased 6 percent as sales volumes increased 5 percent and favorable currency rates increased sales by 1 percent. Sales benefited by 1 percent from changes in product mix and an additional slight benefit from our acquisition of our joint venture in India, offset by lower net selling prices of about 2 percent. The volume increase was driven by gains in Latin America, primarily Argentina and Brazil, China, Eastern Europe and Middle East/Africa.
Net sales in developed markets outside North America decreased about 6 percent. Sales volumes decreased 6 percent and changes in net selling prices decreased sales by 3 percent, partially offset by favorable currency rates of more than 1 percent and improved product mix of 1 percent. The volume declines were mostly in South Korea, which was impacted by a lower birth rate.
2016 vs. 2015
Net sales of $9.0 billion in 2016 decreased 2 percent compared to 2015. Unfavorable currency rates decreased sales by 5 percent while sales volumes increased 4 percent. Changes in net selling prices decreased sales by 1 percent. Operating profit of $1,857 decreased 1 percent. The comparison was impacted by unfavorable currency effects and higher marketing, research and general expenses on a local currency basis, mostly offset by organic sales growth and cost savings.
Net sales in North America increased 2 percent. Sales volumes increased 4 percent, while lower net selling prices reduced sales by 2 percent. Child care volumes increased high-single digits and adult care volumes rose in the mid-single digits, as both businesses benefited from category growth and innovations launched in the last 12 months. Volumes on Huggies baby wipes rose mid-single digits. Huggies diapers volumes were down low-single digits, although market shares were up slightly.
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| 16 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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Net sales in developing and emerging markets decreased 6 percent, including an 11 percent negative impact from unfavorable currency rate changes. This was partially offset by sales volume increases of 4 percent and changes in net selling prices that increased sales by 1 percent. Volume growth included gains in China, Eastern Europe, Africa and Central America, while volumes declined in Argentina and Brazil. Net selling prices increased in Argentina and Brazil, but decreased in China.
Net sales in developed markets outside North America decreased 2 percent. Currency rates were unfavorable by 3 percent. Sales volumes increased 2 percent and product mix was favorable 1 percent, while changes in net selling prices decreased sales by 2 percent.
Consumer Tissue
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 | | | | 2017 | | 2016 | | 2015 |
| Net Sales | | $ | 5,932 |
| | $ | 5,967 |
| | $ | 6,121 |
| | Operating Profit | | $ | 1,034 |
| | $ | 1,117 |
| | $ | 1,073 |
|
|
| | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | Operating Profit | | Percent Change |
| | | 2017 vs. 2016 | | 2016 vs. 2015 | | | | 2017 vs. 2016 | | 2016 vs. 2015 |
| Volume | | — |
| | — |
| | Volume | | (2 | ) | | 1 |
|
| Net Price | | (1 | ) | | — |
| | Net Price | | (5 | ) | | 2 |
|
| Mix/Other | | — |
| | (1 | ) | | Input Costs | | (14 | ) | | 4 |
|
| Currency | | 1 |
| | (2 | ) | | Cost Savings | | 11 |
| | 10 |
|
Total(a) | | (1 | ) | | (3 | ) | | Currency Translation | | — |
| | (1 | ) |
| | | | | | | Other(c) | | 3 |
| | (12 | ) |
Organic(b) | | (1 | ) | | — |
| | Total | | (7 | ) | | 4 |
|
| |
(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) | Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs. |
2017 vs. 2016
Net sales of $5.9 billion decreased slightly compared to prior year. Changes in net selling prices decreased sales by 1 percent, mostly offset by favorable currency rates. Operating profit of $1,034 decreased 7 percent. The comparison was impacted by lower sales and input cost inflation, partially offset by cost savings and reduced marketing, research and general spending.
Net sales in North America decreased about 3 percent compared to prior year. Sales volumes decreased by 2 percent and changes in net selling prices decreased sales slightly. Sales volumes were down in bathroom tissue and facial tissue, and up in paper towels.
Net sales in developing and emerging markets increased 5 percent as sales volumes increased 5 percent, primarily in Latin America. Favorable currency rates increased sales by about 4 percent, while changes in net selling prices and product mix decreased sales by 3 percent and 1 percent, respectively.
Net sales in developed markets outside North America decreased about 1 percent. Changes in net selling prices decreased sales by 1 percent and sales volumes were slightly lower, partially offset by improved product mix.
2016 vs. 2015
Net sales of $6.0 billion in 2016 decreased 3 percent compared to 2015 as unfavorable currency rates and changes in product mix reduced sales by 2 percent and 1 percent, respectively. Operating profit of $1,117 increased 4 percent compared to prior year. The comparison benefited from cost savings and lower input costs, partially offset by unfavorable foreign currency effects.
Net sales in North America were essentially even with the prior year. Sales volumes increased by 1 percent, with increases in all product categories, while product mix was unfavorable by 1 percent.
Net sales in developing and emerging markets decreased 7 percent as unfavorable currency rates reduced sales by about 7 percent. Sales volumes decreased about 4 percent, primarily in Latin America, while changes in net selling prices increased sales by 3 percent.
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| 17 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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Net sales in developed markets outside North America decreased 4 percent as unfavorable currency effects reduced sales by 4 percent. Sales volumes increased 1 percent, mostly in Australia, while changes in net selling prices decreased sales by 1 percent.
K-C Professional
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 | | | | 2017 | | 2016 | | 2015 |
| Net Sales | | $ | 3,208 |
| | $ | 3,150 |
| | $ | 3,219 |
| | Operating Profit | | $ | 633 |
| | $ | 603 |
| | $ | 590 |
|
|
| | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | Operating Profit | | Percent Change |
| | | 2017 vs. 2016 | | 2016 vs. 2015 | | | | 2017 vs. 2016 | | 2016 vs. 2015 |
| Volume | | 1 |
| | — |
| | Volume | | 3 |
| | 1 |
|
| Net Price | | (1 | ) | | 1 |
| | Net Price | | (3 | ) | | 4 |
|
| Mix/Other | | — |
| | (1 | ) | | Input Costs | | (12 | ) | | (1 | ) |
| Currency | | 1 |
| | (2 | ) | | Cost Savings | | 12 |
| | 9 |
|
Total(a) | | 2 |
| | (2 | ) | | Currency Translation | | 1 |
| | (2 | ) |
| | | | | | | Other(c) | | 4 |
| | (9 | ) |
Organic(b) | | 1 |
| | — |
| | Total | | 5 |
| | 2 |
|
| |
(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) | Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs. |
2017 vs. 2016
Net sales of $3.2 billion in 2017 increased 2 percent compared to 2016, including the benefit of favorable currency rates of 1 percent. The combined impact from sales volume growth and changes in net selling prices increased sales by 1 percent. Operating profit of $633 increased 5 percent. The comparison benefited from cost savings and lower marketing, research and general spending, partially offset by input cost inflation.
Net sales in North America increased about 1 percent. Sales volumes increased more than 1 percent, including growth in safety and other product categories. Changes in net selling prices decreased sales by about 1 percent.
Net sales in developing and emerging markets increased 5 percent as favorable currency rates increased sales by 3 percent. Sales volumes increased 1 percent, and the combined impact of changes in product mix and net selling prices increased sales by 1 percent.
Net sales in developed markets outside North America increased 3 percent as sales volumes and higher net selling prices each increased sales by 1 percent. Favorable currency rates benefited sales slightly.
2016 vs. 2015
Net sales of $3,150 in 2016 decreased 2 percent compared to 2015 as unfavorable currency rate changes decreased sales by about 2 percent, partially offset by changes in net selling prices that increased sales by about 1 percent. Operating profit of $603 increased 2 percent. The comparison benefited from higher selling prices and cost savings, partially offset by unfavorable currency effects and higher marketing, research and general expenses on a local currency basis.
Net sales in North America increased 2 percent. Sales volumes increased 1 percent, mostly due to growth in washroom products, and the combined impact of changes in net selling prices and product mix increased sales by 6 percent and 1 percent, respectively. The acquisition of Thinx increased sales by 1 percent. Volumes decreased 3 percent, which included the impact from a planned exit of a private label contract in 2022.
Net sales in D&E Markets increased 3 percent. Changes in net selling prices and product mix increased sales by approximately 12 percent and 3 percent, respectively. The improvements in product mix were primarily in China. Volumes decreased 6 percent led by declines in Eastern Europe, Indonesia and Brazil. Changes in foreign currency exchange rates decreased sales by 5 percent.
Net sales in developingDeveloped Markets outside North America were slightly down compared to the prior year. Changes in foreign currency exchange rates decreased sales by 11 percent. Volumes increased 5 percent with growth across all markets. Changes in net selling prices and emerging marketsproduct mix increased sales by 5 percent and 1 percent, respectively.
Operating profit of $1,787 decreased 3 percent as4 percent. The comparison was negatively impacted by higher input costs, higher marketing, research and general expenses, lower volumes, unfavorable currency effects, and higher other manufacturing costs, partially offset by higher net selling prices, cost savings, and improved product mix.
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| 21 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Consumer Tissue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | | | | | 2022 | | 2021 | | |
| Net Sales | | $ | 6,243 | | | $ | 6,034 | | | | | Operating Profit | | $ | 806 | | | $ | 888 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | | | Operating Profit | | Percent Change | | |
| | 2022 vs. 2021 | | | | | | 2022 vs. 2021 | | |
| Volume | | (1) | | | | | Volume | | (5) | | | |
| Net Price | | 8 | | | | | Net Price | | 55 | | | |
| Mix/Other | | — | | | | | Input Costs | | (66) | | | |
| Currency | | (4) | | | | | Cost Savings(c) | | 12 | | | |
Total(a) | | 3 | | | | | Currency Translation | | (1) | | | |
| | | | | | Other(d) | | (4) | | | |
Organic(b) | | 7 | | | | | Total | | (9) | | | |
(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) Benefits of the FORCE program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency rates reducedtransaction effects and other manufacturing costs.
Net sales by 8in North America increased 7 percent. Changes in net selling prices increased sales by 56 percent, and product mix improved sales by 1 percent, while sales volumes decreased byincreased 1 percent.
Net sales in developed markets outside North America were down 5 percent, including a 3 percent negative impact from unfavorable currency rates.D&E Markets increased 2 percent. Changes in net selling prices reduced sales by 2 percent and sales volumes decreased 1 percent, while product mix increased sales by 110 percent and approximately 2 percent, respectively. Volumes decreased 6 percent led by declines primarily in Latin America. Changes in foreign currency exchange rates decreased sales by 3 percent.
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| 18 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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2018 Global Restructuring Program
On January 23, 2018, we announced a new global restructuring program. The 2018 Global Restructuring Program will reduce our structural cost baseNet sales in Developed Markets outside North America decreased 3 percent. Changes in foreign currency exchange rates decreased sales by streamlining and simplifying the company’s manufacturing supply chain and overhead organization. The program will make our overhead organization structure and manufacturing supply chain less complex and more efficient. We expect to close or sell approximately 10 manufacturing facilitiespercent, and expand production capacity at several others. We expect to exit or divest some lower-marginexited businesses that generate approximately 1 percent of our net sales. The sales are concentrated in our consumer tissue business segment. The restructuring is expected to impact all of our business segments and our organizations in all major geographies. Workforce reductions are expected to be in the range of 5,000 to 5,500. Certain capital appropriations underassociated with the 2018 Global Restructuring Program are being finalized. Accounting for actions relateddecreased sales by 1 percent. Volumes decreased 1 percent. Changes in net selling prices increased sales by 10 percent.
Operating profit of $806 decreased 9 percent. The comparison was negatively impacted by higher input costs, higher marketing, research and general expenses and lower volumes, partially offset by higher net selling prices, cost savings and lower other manufacturing costs.
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| 22 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
K-C Professional
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2022 | | 2021 | | | | | | 2022 | | 2021 | | |
| Net Sales | | | $ | 3,256 | | | $ | 3,072 | | | | | Operating Profit | | $ | 457 | | | $ | 404 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net Sales | | Percent Change | | | | Operating Profit | | Percent Change | | |
| | 2022 vs. 2021 | | | | | | 2022 vs. 2021 | | |
| Volume | | (4) | | | | | Volume | | (17) | | | |
| Net Price | | 12 | | | | | Net Price | | 89 | | | |
| Mix/Other | | 1 | | | | | Input Costs | | (65) | | | |
| Currency | | (4) | | | | | Cost Savings(c) | | 13 | | | |
Total(a) | | 6 | | | | | Currency Translation | | (4) | | | |
| | | | | | Other(d) | | (3) | | | |
Organic(b) | | 9 | | | | | Total | | 13 | | | |
(a) Total may not equal the sum of volume, net price, mix/other and currency due to each appropriation will commence whenrounding.
(b) Combined impact of changes in volume, net price and mix/other.
(c) Benefits of the appropriation is authorized for execution.FORCE program.
(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.
Net sales in North America increased by 9 percent. Changes in net selling prices and product mix increased sales by 11 percent and 1 percent, respectively. Volumes decreased 3 percent.
Net sales in D&E Markets increased 4 percent. Changes in net selling prices and product mix increased sales by approximately 7 percent and 2 percent, respectively. Changes in foreign currency exchange rates decreased sales by 4 percent.
Net sales in Developed Markets outside North America increased 1 percent. Changes in net selling prices and product mix increased sales by 17 percent and 2 percent, respectively. Changes in foreign currency exchange rates decreased sales by 11 percent, and volumes decreased 7 percent led by declines in Western and Central Europe.
Operating profit of $457 increased 13 percent. The restructuring is expected to be completedcomparison was favorably impacted by the end of 2020, with totalhigher net selling prices, cost savings and lower other manufacturing costs, anticipated to be $1.7 billion to $1.9 billion pre-tax ($1.35 billion to $1.5 billion after tax). Cashpartially offset by higher input costs, are expected to be $900 to $1.0 billion, primarily related to workforce reductions. Non-cash charges are primarily related to incremental depreciationlower volumes and asset write-offs. Annual pre-tax savings from the restructuring are expected to be $500 to $550 by 2021. In addition, to implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2020. Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax ($950 to $1.05 billion after tax). We expect to generate savings of $50 to $70 in 2018.higher marketing, research and general expenses.
Unaudited Quarterly Data
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Fourth | | Third | | Second | | First | | Fourth | | Third | | Second | | First |
| Net Sales | $ | 4,582 |
| | $ | 4,640 |
| | $ | 4,554 |
| | $ | 4,483 |
| | $ | 4,544 |
| | $ | 4,594 |
| | $ | 4,588 |
| | $ | 4,476 |
|
| Gross Profit | 1,598 |
| | 1,659 |
| | 1,644 |
| | 1,652 |
| | 1,678 |
| | 1,670 |
| | 1,664 |
| | 1,639 |
|
| Operating Profit | 812 |
| | 854 |
| | 799 |
| | 834 |
| | 839 |
| | 836 |
| | 838 |
| | 804 |
|
| Net Income | 625 |
| | 579 |
| | 540 |
| | 575 |
| | 518 |
| | 563 |
| | 578 |
| | 560 |
|
| Net Income Attributable to Kimberly-Clark Corporation | 617 |
| | 567 |
| | 531 |
| | 563 |
| | 505 |
| | 550 |
| | 566 |
| | 545 |
|
| Per Share Basis-Diluted | 1.75 |
| | 1.60 |
| | 1.49 |
| | 1.57 |
| | 1.40 |
| | 1.52 |
| | 1.56 |
| | 1.50 |
|
| Cash Dividends Declared Per Share | 0.97 |
| | 0.97 |
| | 0.97 |
| | 0.97 |
| | 0.92 |
| | 0.92 |
| | 0.92 |
| | 0.92 |
|
| Market Price Per Share | | | | | | | | | | | | | | | |
| High | 123.77 |
| | 130.00 |
| | 134.29 |
| | 136.21 |
| | 125.76 |
| | 138.87 |
| | 138.76 |
| | 136.61 |
|
| Low | 109.67 |
| | 115.91 |
| | 125.55 |
| | 113.71 |
| | 111.30 |
| | 121.20 |
| | 123.52 |
| | 121.50 |
|
| Close | 120.66 |
| | 117.68 |
| | 129.11 |
| | 131.63 |
| | 114.12 |
| | 126.14 |
| | 137.48 |
| | 134.51 |
|
Liquidity and Capital Resources
Cash Provided by Operations
Cash provided by operations was $2.9 billion$2,733 in 20172022 compared to $3.2 billion$2,730 in 2016. The decrease was driven by higher tax payments. Cash provided by operations was $2.3 billion in 2015. The increase in 2016 compared to 2015 was driven by improved working capital and lower pension contributions.2021.
|
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| 19 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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Obligations
The following table presents our total contractual obligations for which cash flows are fixed or determinable.
| | | | Total | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023+ | | Total | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028+ |
| Long-term debt | $ | 6,892 |
| | $ | 407 |
| | $ | 714 |
| | $ | 760 |
| | $ | 251 |
| | $ | 298 |
| | $ | 4,462 |
| Long-term debt | $ | 8,060 | | | $ | 472 | | | $ | 524 | | | $ | 550 | | | $ | 396 | | | $ | 595 | | | $ | 5,523 | |
| Interest payments on long-term debt | 3,084 |
| | 222 |
| | 201 |
| | 188 |
| | 170 |
| | 163 |
| | 2,140 |
| Interest payments on long-term debt | 3,205 | | | 277 | | | 264 | | | 252 | | | 232 | | | 227 | | | 1,953 | |
| Operating leases | 610 |
| | 170 |
| | 130 |
| | 99 |
| | 65 |
| | 48 |
| | 98 |
| |
| Operating lease liabilities | | Operating lease liabilities | 539 | | | 138 | | | 119 | | | 100 | | | 83 | | | 53 | | | 46 | |
| Unconditional purchase obligations | 1,173 |
| | 699 |
| | 206 |
| | 204 |
| | 8 |
| | 5 |
| | 51 |
| Unconditional purchase obligations | 4,120 | | | 1,794 | | | 958 | | | 798 | | | 279 | | | 252 | | | 39 | |
| Open purchase orders | 1,907 |
| | 1,808 |
| | 86 |
| | 10 |
| | 2 |
| | 1 |
| | — |
| Open purchase orders | 2,307 | | | 1,768 | | | 440 | | | 47 | | | 28 | | | 22 | | | 2 | |
| Total contractual obligations | $ | 13,666 |
| | $ | 3,306 |
| | $ | 1,337 |
| | $ | 1,261 |
| | $ | 496 |
| | $ | 515 |
| | $ | 6,751 |
| Total contractual obligations | $ | 18,231 | | | $ | 4,449 | | | $ | 2,305 | | | $ | 1,747 | | | $ | 1,018 | | | $ | 1,149 | | | $ | 7,563 | |
The unconditional purchase obligations are for the purchase of raw materials, primarily superabsorbent materials, pulp and utilities. Although we are primarily liable for payments on the above operating leases and unconditional purchase obligations,
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| 23 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
based on historic operating performance and forecasted future cash flows, we believe exposure to losses, if any, under these arrangements is not material.
The open purchase orders displayed in the table represent amounts for goods and services we have negotiated for delivery.
The table does not include amounts where payments are discretionary or the timing is uncertain. The following payments are not included in the table:
•Our consolidated subsidiary, Thinx, has issued common securities to the third-party minority owner, who has certain redemption rights to sell those securities to us. If the rights are exercised, it would require us to pay approximately $50 in 2023 and approximately $185 during a second exercise period of January 1, 2024 through June 30, 2026. See Item 8, Note 3 to the consolidated financial statements for details.
•We will fund our defined benefit pension plans to meet or exceed statutory requirements and currently expect to contribute up to $100approximately $25 to these plans in 2018.2023.
•Other postretirement benefit payments are estimated using actuarial assumptions, including expected future service, to project the future obligations. Based upon those projections, we anticipate making annual payments for these obligations ranging from $58 in 2018 to more than $60 by 2027.of approximately $50 through 2032.
•Accrued income tax liabilities for uncertain tax positions, deferred taxes and noncontrolling interests.
Investing
Our capital spending was $0.8 billion was $876 in 20172022 and 2016.$1,007 in 2021. Acquisition of business, net of cash acquired of $46 in 2022 reflected the acquisition of a controlling interest of Thinx. We expect capital spending to be approximately $1.1 billion$800 to $900 in 2018, including incremental spending from the 2018 Global Restructuring Program.2023.
Financing
We issue long-term debt in the public market periodically. Proceeds from the offerings are used for general corporate purposes, including repayment of maturing debt or outstanding commercial paper indebtedness. See Item 8, Note 46 to the consolidated financial statements for details.
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 $547$373 as of December 31, 20172022 (included in debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the fourth quarter of 2017 was $419 and for the twelve months ended December 31, 20172022 was $417.$757. 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 pension contributions, dividends and income taxes.
At December 31, 2017,2022, total debt was $7.4$8.4 billion compared to $7.6$8.6 billion at December 31, 2016.2021.
We maintain a $2.0 billion revolving credit facility which expires in 2021. ThisJune 2026 and a $775 revolving credit facility which expires in June 2023. These facilities, currently unused, supportssupport 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 paid $1.4$1.6 billion in dividends in 2017.2022. The Board of Directors approved a dividend increase of 3.11.7 percent for 2018.2023. We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs.
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During 2017,2022, we repurchased 7.2 million779 thousand shares of our common stock at a cost of $900$100 through a broker in the open market. We are targeting full-year 20182023 share repurchases between $700 and $900,of approximately $100 to $150, subject to market conditions.
Management believesWe 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, capital spending, payment ofpension contributions, dividends pension plan contributions and other needs for the foreseeable future.
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| 24 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
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.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The critical accounting policies we used in the preparation of the consolidated financial statements are those that are important both to the presentation of our financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to accruals for sales incentives and trade promotion allowances, pension and other postretirement benefits, deferred income taxes and potential income tax assessments.assessments, and goodwill and other intangible assets. These critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.
Sales Incentives and Trade Promotion Allowances
Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions end-of-aisle or in-store product displays and other activities conducted by our customers to promote our products. Rebate and promotion accruals are based on estimates of the quantity of customer sales. Promotion accruals also consider estimates of the number of consumer coupons that will be redeemed and timing and costs of activities within the promotional programs. Generally, the estimates forestimated redemption value of consumer coupon costscoupons and related expense are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories.categories, and the cost is recorded when the related revenue from customers is realized. Our related accounting policies are discussed in Item 8, Note 1 to the consolidated financial statements. The accounting policies for these programs did not materially change with the adoption, on January 1, 2018, of the Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers.
Employee Postretirement Benefits
We have defined benefit pension plansSubstantially all regular employees in the U.S. and the United Kingdom (the "Principal Plans") and/orare covered by defined contribution retirement plans covering substantially all regular employees.and certain U.S. and United Kingdom employees previously earned benefits covered by defined benefit pension plans that currently provide no future service benefit (the "Principal Plans"). Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. Our related accounting policies and account balances are discussed in Item 8, Note 68 to the consolidated financial statements.
Changes in certain assumptions could affect pension expense and the benefit obligations, particularly the estimated long-term rate of return on plan assets and the discount ratesrate used to calculate the obligations:
•Long-term rate of return on plan assets. The expected long-term rate of return is evaluated on an annual basis. In setting these assumptions, we consider a number of factors including projected future returns by asset class relative to the target asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered appropriate.
As of December 31, 2017,2022, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.5$1.0 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, includingand whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required. If the expected long-term ratesrate of return on assets for the Principal Plans were lowered by 0.25 percent, the impact on annual pension expense would not be material in 2018.2023.
•Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 20172022 was based on a portfolio of high quality corporate debt securities with cash flows that largely match the expected benefit payments of the plan. For the United Kingdom plan, the discount rate was determined based on yield curves constructed from a portfolio of high quality corporate debt securities. Each year's expected future benefit payments were discounted to their present value at the appropriate yield curve rate to determine the pension obligations.
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If the discount rate assumptions for these same plans were reduced by 0.25 percent, the increase in annual pension expense would not be material in 2018,2023, and the December 31, 20172022 pension liability would increase by about $145.$60.
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•Other assumptions. There are a number of other assumptions involved in the calculation of pension expense and benefit obligations, primarily related to participant demographics and benefit elections.
Pension expense for defined benefit pension plans is estimated to approximate $35$100 in 2018.2023, including estimated pension settlement charges. Pension expense beyond 20182023 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered participants in the plans. The estimate of pension expense for 2018 does not include any potential effects related to the 2018 Global Restructuring Program (see Item 8, Note 15 to the consolidated financial statements).
Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. Changes in significant assumptions could affect the consolidated expense and benefit obligations, particularly the discount ratesrate used to calculate the obligations and the health care cost trend rate:
•Discount rate. The determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefitbenefit section above, and the methodology for each country is the same as the methodology used to determine the discount rate for that country's pension obligation. If the discount rate assumptions for these plans were reduced by 0.25 percent, the impact to 20182023 other postretirement benefit expense and the increase in the December 31, 20172022 benefit liability would not be material.
•Health care cost trend rate. The health care cost trend rate is based on a combination of inputs including our recent claims history and insights from external advisers regarding recent developments in the health care marketplace, as well as projections of future trends in the marketplace.
Our related accounting policies, account balances and the effects of a one percentage point change in the health care cost trend rate are discussed in Item 8, Note 6 to the consolidated financial statements.
Deferred Income Taxes and Potential Assessments
As a global organization, we are subject to income tax requirements in various jurisdictions in the U.S. and internationally. Changes in certain assumptions related to income taxes could significantly affect consolidated results, particularly with regard to valuation allowances on deferred tax assets, undistributed earnings of subsidiaries outside the U.S. and uncertain tax positions. Our income tax related accounting policies, account balances and matters affecting income taxes are discussed in Item 8, Note 1113 to the consolidated financial statements.
•Deferred tax assets and related valuation allowances. We have recorded deferred tax assets related to, among other matters, income tax loss carryforwards, income tax credit carryforwards and capital loss carryforwards and have established valuation allowances against these deferred tax assets. These carryforwards are primarily in non-U.S. taxing jurisdictions and in certain states in the U.S. Foreign tax credits earned in the U.S. in current and prior years, which cannot be used currently, also give rise to net deferred tax assets. In determining the valuation allowances to establish against these deferred tax assets, many factors are considered, including the specific taxing jurisdiction, the carryforward period, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
•Undistributed earnings. As of December 31, 2022, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $7.4 billion. Earnings of $3.7 billion were previously subject to U.S. federal income tax. Any additional taxes due with respect to such previously-taxed foreign earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes. Deferred taxes have been recorded for foreign and U.S. state income taxes on $1.0$0.7 billion of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute $4.5the remaining $3.0 billion of previously-taxed foreign earnings of foreign consolidated subsidiaries taxed as part of the transition tax and therefore have not recorded any deferred taxes related to such amounts for foreign and U.S. state income taxes.taxes on such earnings. We consider any excess of the amount for financial reporting over the tax basis of our investment in our foreign subsidiaries to be indefinitely reinvested. At this time, theThe determination of deferred tax liabilities on thisthe amount of financial reporting over tax basis or the $3.0 billion of previously-taxed foreign earnings is not practicable.
•Uncertain tax positions. We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate. Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations
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and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities or the expiration of the statute of limitations.
Legal Matters
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Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are not subject to amortization and are tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Intangible assets that are deemed to have finite lives are amortized over their useful lives, generally ranging from 4 to 20 years. We typically obtain the assistance of third-party valuation specialists to measure the acquisition date fair values of goodwill and other intangible assets acquired.
Events and conditions that could result in impairment include a sustained drop in the market price of our common shares, increased competition or loss of market share, obsolescence, product claims that result in a significant loss of sales or profitability over the product life, deterioration in macroeconomic conditions, or declining financial performance in comparison to projected results.
Our related accounting policies, acquisitions of Thinx and Softex Indonesia, and goodwill and other intangible assets account balances are discussed in Item 8, Notes 1, 3 and 4, respectively, to the consolidated financial statements.
Goodwill
In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as macroeconomic, industry and competitive conditions, legal and regulatory environments, historical and projected financial performance, significant changes in the reporting unit and the magnitude of excess fair value over carrying amount from the previous quantitative impairment testing. If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed. When a quantitative test is considered necessary, estimates of fair value for goodwill impairment testing are determined based on a discounted cash flow model and a market-based approach. We use inputs from our long-range planning process to determine growth rates for sales and earnings. The other key estimates and factors used in the discounted cash flow include, but are not limited to, discount rates, actual business trends experienced, commodity prices, foreign exchange rates, inflation and terminal growth rates.
For 2022, we completed the required annual assessment of goodwill for impairment for all of our reporting units using a qualitative assessment as of the first day of the third quarter, and we determined that it is more likely than not that the fair value of goodwill significantly exceeds the carrying amount for each of our reporting units.
Other Intangible Assets
We evaluate the useful lives of our other intangible assets, primarily brands, to determine if they are party to certain legal proceedings relating tofinite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.
Our estimate of the fair value of our former health care business, Halyard,brand assets is based on a discounted cash flow model and a market-based approach using inputs which include projected revenues from our long-range plan, assumed royalty rates that could be payable if we spun-off on October 31, 2014. This includes Bahamas Surgery Center v. Kimberly-Clark Corporation, et al.,did not own the brands, and a California consumer class action relating todiscount rate. The cash flows used in the sale of surgical gowns. On April 7, 2017, the jury awarded the plaintiff class $3.9 in compensatory damages and $350 in punitive damages against us. We have filed motions challenging the jury’s verdict as we believe it is contrary to the evidence presented at trial and that the punitive damage award is baseless, excessive and notdiscounted cash flow model are consistent with Californiathose we use in our internal planning, which gives consideration to actual business trends experienced and federal laws. Under the termslong-term business strategy.
We performed our 2022 impairment assessment of our intangible assets as of the distribution agreement we entered into with Halyard in connection withfirst day of the spin-off, Halyard is obligatedthird quarter, and based upon a qualitative assessment, no impairment indicators were found to indemnify us for legal proceedings, claims and other liabilities primarily related to our former health care business. Halyard and Kimberly-Clark have each filed suits against the other seeking declaratory judgment regarding the scope of these indemnification obligations. We are also party to additional legal proceedings relating to Halyard, including civil actions, qui tam matters, a shareholder derivative suit, a securities class action and certain subpoena and document requests from the federal government. Although the results of litigation and claims cannot be predicted with certainty, we continue to believe that the final outcome of these matters will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity.present.
New Accounting Standards
See Item 8, Note 1 to the consolidated financial statements for a description of newrecent accounting standards and their anticipated effects on our consolidated financial statements.
Business Outlook
In 2018, we plan to continue to execute our Global Business Plan strategies, which include a focus on targeted growth initiatives, innovation and brand building, cost savings programs and shareholder-friendly capital allocation. In 2018, we expect earnings per share to be $3.90 to $4.50. Adjusted earnings per share are expected to be $6.90 to $7.20, which excludes 2018 Global Restructuring Program charges equivalent to $2.70 to $3.00. Our adjusted earnings per share guidance is based on the assumptions described below:
We expect net sales to increase 1 to 2 percent. We anticipate changes in foreign currency exchange rates to have a neutral to 1 percent positive impact on net sales, and the acquisition of our joint venture in India should benefit sales slightly.
We expect organic sales to increase approximately 1 percent, driven by higher sales volumes. Changes in net selling prices and product mix are expected to be similar, or up slightly, year-on-year.
We expect adjusted operating profit growth of 2 to 5 percent.
We plan to achieve cost savings of approximately $400 from our FORCE program, and $50 to $70 from the 2018 Global Restructuring Program.
We expect inflation in key cost inputs of $300 to $400. We anticipate the majority of the inflation to occur in international markets.
We expect interest expense to be down approximately 20 percent.
We expect an adjusted effective tax rate of 23 to 26 percent.
We expect net income from equity companies similar, or up slightly, year-on-year.
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, raw material, energy including the impact in Argentina and other input costs, Turkey, 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.
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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.
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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, 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, failure to realize the expected benefits or synergies from our acquisition and disposition activity (including our pending agreement to sell our Neve tissue brand and associated assets in Brazil), changes in customer preferences, severe weather conditions, government trade or similar regulatory actions, potential competitive pressures on selling prices for our products, energy costs, and retail trade customer actions, as well as 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, could affect the realization of these estimates.
The factors described 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 any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational enterprise, we are exposed to risks such as changes in foreign currency exchange rates, interest rates and commodity prices. A variety of practices are employed to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation. Foreign currency derivative instruments are primarily entered into with major financial institutions. Our credit exposure under these arrangements is limited to agreements with a positive fair value at the reporting date. Credit risk with respect to the counterparties is actively monitored but is not considered significant since these transactions are executed with a diversified group of financial institutions.
Presented below is a description of our risks (foreign currency risk and interest rate risk) together with a sensitivity analysis, performed annually, of each of these risks based on selected changes in market rates and prices. These analyses reflect management's view of changes which are reasonably possible to occur over a one-year period. Also included is a description of our commodity price risk.
Foreign Currency Risk
A portion of our foreign currency risk is managed bythrough the systematic use of foreign currency forward and swap contracts. The use of these instruments allowssupports the management of transactional exposures to exchange rate fluctuations becauseas the gains or losses incurred on the derivative instruments will offset, in whole or in part, lossesgains or gainslosses on the underlying foreign currency exposure. We also utilize cross currency swaps and foreign denominated debt to hedge certain investments in foreign subsidiaries. The gain or loss on these instruments is recognized in other comprehensive income to offset the change in value of the net investments being hedged.
Foreign currency contracts and transactional exposures are sensitive to changes in foreign currency exchange rates. An annual test is performed to quantify the effects that possible changes in foreign currency exchange rates would have on annual operating profit based on our foreign currency contracts and transactional exposures at the current year-end. The balance sheet effect is calculated by multiplying each affiliate's net monetary asset or liability position by a 10 percent change in the foreign currency exchange rate versus the U.S. dollar.
As of December 31, 2017,2022, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies involving balance sheet transactional exposures would not be material to our consolidated financial position, results of operations or cash flows. This hypothetical loss on transactional exposures is based on the difference between the December 31, 20172022 rates and the assumed rates.
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Our operations in Argentina ("K-C Argentina") are reported using highly inflationary accounting and their functional currency is the U.S. dollar. Changes in the value of an Argentine peso versus the U.S. dollar applied to our net peso monetary position are recorded in Other (income) and expense, net at the time of the change. As of December 31, 2022, K-C Argentina had a small net peso monetary position and a 10 percent unfavorable change in the exchange rate would not be material.
As of April 1, 2022, we elected to adopt highly inflationary accounting for our operations in Turkey (“K-C Turkey”), and their functional currency is also the U.S. dollar. Changes in the value of a Turkish lira versus the U.S. dollar applied to our net lira monetary position are recorded in Other (income) and expense, net at the time of the change. As of December 31, 2022, K-C Turkey had a small net lira monetary position and a 10 percent unfavorable change in the exchange rate would not be material.
The translation of the balance sheets of non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. Consequently, an annual test is performed to determine if changes in currency exchange rates would have a significant effect on the translation of the balance sheets of non-U.S. operations into U.S. dollars. These translation gains or losses are recorded as unrealized translation adjustments ("UTA") within stockholders' equity. The hypothetical change in UTA is calculated by multiplying the net assets of these non-U.S. operations by a 10 percent change in the currency exchange rates. As of December 31, 2017,2022, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of our foreign currency translation exposures would have reduced stockholders' equity by approximately $750.$650. In the view of management, the above potential UTA adjustments resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position because they would not affect our cash flow.
Interest Rate Risk
Interest rate risk is managed through the maintenance of a portfolio of variable-variable and fixed-rate debt composed of short-short and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. At December 31, 2017,2022, the long-term debt portfolio was comprised of primarily fixed-rate debt.
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From time to time, we also hedge the anticipated issuance of fixed-rate debt and those contracts are designated as cash flow hedges.
In order to determine the impact of changes in interest rates on our financial position or future results of operations, we calculated the increase or decrease in the market value of fixed-rate debt using a 10 percent change in current market interest rates and the rates governing these instruments. At December 31, 2017,2022, a 10 percent decrease in interest rates would have increased the fair value of fixed-rate debt by about $285,$338, which would not have a significant impact on our financial statements as we do not record debt at fair value.
Commodity Price Risk
We are subject to commodity price risk, the most significant of which relates to the price of pulp.pulp and petroleum-based materials. Selling prices of tissue products are influenced, in part, by the market price for pulp.these pulp and petroleum-based materials. As previously discussed under Item 1A, "Risk Factors," increases in pulp or petroleum-based material prices could adversely affect earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in pulpcommodity prices. DerivativeIn some instances, we use contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs, but derivative instruments have not been used to manage these risks.
Our energy, manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions. As previously discussed under Item 1A, "Risk Factors," there can be no assurance we will be fully protected against substantial changes in the price or availability of energy sources. In addition, we are subject to price risk for utilities and manufacturing inputs, used in our manufacturing operations. Derivative instruments are used in accordance with our risk management policy to hedge a limited portion of the price risk.
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTSTATEMENTS
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| | | Year Ended December 31 |
| (Millions of dollars, except per share amounts) | | 2017 | | 2016 | | 2015 |
| Net Sales | | $ | 18,259 |
| | $ | 18,202 |
| | $ | 18,591 |
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| Cost of products sold | | 11,706 |
| | 11,551 |
| | 11,967 |
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| Gross Profit | | 6,553 |
| | 6,651 |
| | 6,624 |
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| Marketing, research and general expenses | | 3,227 |
| | 3,326 |
| | 3,443 |
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| Other (income) and expense, net | | 27 |
| | 8 |
| | 1,568 |
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| Operating Profit | | 3,299 |
| | 3,317 |
| | 1,613 |
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| Interest income | | 10 |
| | 11 |
| | 17 |
|
| Interest expense | | (318 | ) | | (319 | ) | | (295 | ) |
| Income Before Income Taxes and Equity Interests | | 2,991 |
| | 3,009 |
| | 1,335 |
|
| Provision for income taxes | | (776 | ) | | (922 | ) | | (418 | ) |
| Income Before Equity Interests | | 2,215 |
| | 2,087 |
| | 917 |
|
| Share of net income of equity companies | | 104 |
| | 132 |
| | 149 |
|
| Net Income | | 2,319 |
| | 2,219 |
| | 1,066 |
|
| Net income attributable to noncontrolling interests | | (41 | ) | | (53 | ) | | (53 | ) |
| Net Income Attributable to Kimberly-Clark Corporation | | $ | 2,278 |
| | $ | 2,166 |
| | $ | 1,013 |
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| Per Share Basis | | | | | | |
| Net Income Attributable to Kimberly-Clark Corporation | | | | | | |
| Basic | | $ | 6.44 |
| | $ | 6.03 |
| | $ | 2.78 |
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| Diluted | | $ | 6.40 |
| | $ | 5.99 |
| | $ | 2.77 |
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| Cash Dividends Declared | | $ | 3.88 |
| | $ | 3.68 |
| | $ | 3.52 |
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| | Year Ended December 31 |
| (Millions of dollars, except per share amounts) | | 2022 | | 2021 | | 2020 |
| Net Sales | | $ | 20,175 | | | $ | 19,440 | | | $ | 19,140 | |
| Cost of products sold | | 13,956 | | | 13,452 | | | 12,318 | |
| Gross Profit | | 6,219 | | | 5,988 | | | 6,822 | |
| Marketing, research and general expenses | | 3,581 | | | 3,399 | | | 3,632 | |
| Other (income) and expense, net | | (43) | | | 28 | | | (54) | |
| Operating Profit | | 2,681 | | | 2,561 | | | 3,244 | |
| Nonoperating expense | | (73) | | | (86) | | | (70) | |
| Interest income | | 14 | | | 6 | | | 8 | |
| Interest expense | | (282) | | | (256) | | | (252) | |
| Income Before Income Taxes and Equity Interests | | 2,340 | | | 2,225 | | | 2,930 | |
| Provision for income taxes | | (495) | | | (479) | | | (676) | |
| Income Before Equity Interests | | 1,845 | | | 1,746 | | | 2,254 | |
| Share of net income of equity companies | | 116 | | | 98 | | | 142 | |
| Net Income | | 1,961 | | | 1,844 | | | 2,396 | |
| Net income attributable to noncontrolling interests | | (27) | | | (30) | | | (44) | |
| Net Income Attributable to Kimberly-Clark Corporation | | $ | 1,934 | | | $ | 1,814 | | | $ | 2,352 | |
| | | | | | |
| Per Share Basis | | | | | | |
| Net Income Attributable to Kimberly-Clark Corporation | | | | | | |
| Basic | | $ | 5.73 | | | $ | 5.38 | | | $ | 6.90 | |
| Diluted | | $ | 5.72 | | | $ | 5.35 | | | $ | 6.87 | |
| | | | | | |
| | | | | | |
See notes to the consolidated financial statements.
|
| | | | | | | |
| 2630 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF COMPREHENSIVE INCOME
|
| | | | | | | | | | | | |
| | | Year Ended December 31 |
| (Millions of dollars) | | 2017 | | 2016 | | 2015 |
| Net Income | | $ | 2,319 |
| | $ | 2,219 |
| | $ | 1,066 |
|
| Other Comprehensive Income (Loss), Net of Tax | | | | | | |
| Unrealized currency translation adjustments | | 517 |
| | (107 | ) | | (922 | ) |
| Employee postretirement benefits | | 118 |
| | (113 | ) | | 942 |
|
| Other | | (45 | ) | | 15 |
| | 5 |
|
| Total Other Comprehensive Income (Loss), Net of Tax | | 590 |
| | (205 | ) | | 25 |
|
| Comprehensive Income | | 2,909 |
| | 2,014 |
| | 1,091 |
|
| Comprehensive income attributable to noncontrolling interests | | (76 | ) | | (44 | ) | | (33 | ) |
| Comprehensive Income Attributable to Kimberly-Clark Corporation | | $ | 2,833 |
| | $ | 1,970 |
| | $ | 1,058 |
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31 |
| (Millions of dollars) | | 2022 | | 2021 | | 2020 |
| Net Income | | $ | 1,961 | | | $ | 1,844 | | | $ | 2,396 | |
| Other Comprehensive Income (Loss), Net of Tax | | | | | | |
| Unrealized currency translation adjustments | | (355) | | | (288) | | | 129 | |
| Employee postretirement benefits | | 103 | | | 122 | | | 37 | |
| Cash flow hedges and other | | (185) | | | 84 | | | (34) | |
| Total Other Comprehensive Income (Loss), Net of Tax | | (437) | | | (82) | | | 132 | |
| Comprehensive Income | | 1,524 | | | 1,762 | | | 2,528 | |
| Comprehensive income attributable to noncontrolling interests | | (19) | | | (15) | | | (55) | |
| Comprehensive Income Attributable to Kimberly-Clark Corporation | | $ | 1,505 | | | $ | 1,747 | | | $ | 2,473 | |
See notes to the consolidated financial statements.
|
| | | | | | | |
| 2731 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSHEETS |
| | | | | | | | |
| | | December 31 |
| (Millions of dollars) | | 2017 | | 2016 |
| ASSETS | | | | |
| Current Assets | | | | |
| Cash and cash equivalents | | $ | 616 |
| | $ | 923 |
|
| Accounts receivable, net | | 2,315 |
| | 2,176 |
|
| Inventories | | 1,790 |
| | 1,679 |
|
| Other current assets | | 490 |
| | 337 |
|
| Total Current Assets | | 5,211 |
| | 5,115 |
|
| Property, Plant and Equipment, Net | | 7,436 |
| | 7,169 |
|
| Investments in Equity Companies | | 233 |
| | 257 |
|
| Goodwill | | 1,576 |
| | 1,480 |
|
| Other Assets | | 695 |
| | 581 |
|
| TOTAL ASSETS | | $ | 15,151 |
| | $ | 14,602 |
|
| | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| Current Liabilities | | | | |
| Debt payable within one year | | $ | 953 |
| | $ | 1,133 |
|
| Trade accounts payable | | 2,834 |
| | 2,609 |
|
| Accrued expenses | | 1,730 |
| | 1,775 |
|
| Dividends payable | | 341 |
| | 329 |
|
| Total Current Liabilities | | 5,858 |
| | 5,846 |
|
| Long-Term Debt | | 6,472 |
| | 6,439 |
|
| Noncurrent Employee Benefits | | 1,184 |
| | 1,301 |
|
| Deferred Income Taxes | | 395 |
| | 532 |
|
| Other Liabilities | | 299 |
| | 309 |
|
| Redeemable Preferred Securities of Subsidiaries | | 61 |
| | 58 |
|
| Stockholders' Equity | | | | |
| Kimberly-Clark Corporation | | | | |
| 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 December 31, 2017 and 2016 | | 473 |
| | 473 |
|
| Additional paid-in capital | | 776 |
| | 697 |
|
Common stock held in treasury, at cost - 27.5 and 22.0 million
shares at December 31, 2017 and 2016, respectively | | (4,431 | ) | | (3,629 | ) |
| Retained earnings | | 6,730 |
| | 5,831 |
|
| Accumulated other comprehensive income (loss) | | (2,919 | ) | | (3,474 | ) |
| Total Kimberly-Clark Corporation Stockholders' Equity (Deficit) | | 629 |
| | (102 | ) |
| Noncontrolling Interests | | 253 |
| | 219 |
|
| Total Stockholders' Equity | | 882 |
| | 117 |
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 15,151 |
| | $ | 14,602 |
|
| | | | | | | | | | | | | | |
| | December 31 |
| (Millions of dollars) | | 2022 | | 2021 |
| ASSETS | | | | |
| Current Assets | | | | |
| Cash and cash equivalents | | $ | 427 | | | $ | 270 | |
| Accounts receivable, net | | 2,280 | | | 2,207 | |
| Inventories | | 2,269 | | | 2,239 | |
| Other current assets | | 753 | | | 849 | |
| Total Current Assets | | 5,729 | | | 5,565 | |
| Property, Plant and Equipment, Net | | 7,885 | | | 8,097 | |
| Investments in Equity Companies | | 238 | | | 290 | |
| Goodwill | | 2,074 | | | 1,840 | |
| Other Intangible Assets, Net | | 851 | | | 810 | |
| Other Assets | | 1,193 | | | 1,235 | |
| TOTAL ASSETS | | $ | 17,970 | | | $ | 17,837 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| Current Liabilities | | | | |
| Debt payable within one year | | $ | 844 | | | $ | 433 | |
| Trade accounts payable | | 3,813 | | | 3,840 | |
| Accrued expenses and other current liabilities | | 2,289 | | | 2,096 | |
| Dividends payable | | 388 | | | 380 | |
| Total Current Liabilities | | 7,334 | | | 6,749 | |
| Long-Term Debt | | 7,578 | | | 8,141 | |
| Noncurrent Employee Benefits | | 654 | | | 809 | |
| Deferred Income Taxes | | 647 | | | 694 | |
| Other Liabilities | | 799 | | | 681 | |
| Redeemable Common and Preferred Securities of Subsidiaries | | 258 | | | 26 | |
| Stockholders' Equity | | | | |
| Kimberly-Clark Corporation | | | | |
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 December 31, 2022 and 2021 | | 473 | | | 473 | |
| Additional paid-in capital | | 679 | | | 605 | |
Common stock held in treasury, at cost - 41.1 and 41.8 million
shares at December 31, 2022 and 2021, respectively | | (5,137) | | | (5,183) | |
| Retained earnings | | 8,201 | | | 7,858 | |
| Accumulated other comprehensive income (loss) | | (3,669) | | | (3,239) | |
| Total Kimberly-Clark Corporation Stockholders' Equity | | 547 | | | 514 | |
| Noncontrolling Interests | | 153 | | | 223 | |
| Total Stockholders' Equity | | 700 | | | 737 | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 17,970 | | | $ | 17,837 | |
See notes to the consolidated financial statements.
|
| | | | | | | |
| 2832 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS' EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Millions of dollars, shares in thousands) | | Common Stock Issued | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests |
| | Shares | | Amount | | Shares | | Amount | |
| Balance at December 31, 2014 | | 428,597 |
| | $ | 536 |
| | $ | 632 |
| | 63,261 |
| | $ | (5,597 | ) | | $ | 8,470 |
| | $ | (3,312 | ) | | $ | 270 |
|
| Net income in stockholders' equity | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,013 |
| | — |
| | 48 |
|
| Other comprehensive income, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 45 |
| | (20 | ) |
| Stock-based awards exercised or vested | | — |
| | — |
| | (47 | ) | | (2,888 | ) | | 186 |
| | — |
| | — |
| | — |
|
| Income tax benefits on stock-based compensation | | — |
| | — |
| | 32 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Shares repurchased | | — |
| | — |
| | — |
| | 7,364 |
| | (833 | ) | | — |
| | — |
| | — |
|
| Shares retired | | (50,000 | ) | | (63 | ) | | — |
| | (50,000 | ) | | 3,272 |
| | (3,209 | ) | | — |
| | — |
|
| Recognition of stock-based compensation | | — |
| | — |
| | 75 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Dividends declared | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,280 | ) | | — |
| | (36 | ) |
| Shares purchased from noncontrolling interest | | — |
| | — |
| | (94 | ) | | — |
| | — |
| | — |
| | (12 | ) | | (45 | ) |
| Other | | — |
| | — |
| | 11 |
| | — |
| | — |
| | — |
| | 1 |
| | (3 | ) |
| Balance at December 31, 2015 | | 378,597 |
| | 473 |
| | 609 |
| | 17,737 |
| | (2,972 | ) | | 4,994 |
| | (3,278 | ) | | 214 |
|
| Net income in stockholders' equity | | — |
| | — |
| | — |
| | — |
| | — |
| | 2,166 |
| | — |
| | 49 |
|
| Other comprehensive income, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (196 | ) | | (8 | ) |
| Stock-based awards exercised or vested | | — |
| | — |
| | (14 | ) | | (1,906 | ) | | 121 |
| | — |
| | — |
| | — |
|
| Income tax benefits on stock-based compensation | | — |
| | — |
| | 19 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Shares repurchased | | — |
| | — |
| | — |
| | 6,198 |
| | (778 | ) | | — |
| | — |
| | — |
|
| Recognition of stock-based compensation | | — |
| | — |
| | 77 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Dividends declared | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,322 | ) | | — |
| | (36 | ) |
| Other | | — |
| | — |
| | 6 |
| | — |
| | — |
| | (7 | ) | | — |
| | — |
|
| Balance at December 31, 2016 | | 378,597 |
| | 473 |
| | 697 |
| | 22,029 |
| | (3,629 | ) | | 5,831 |
| | (3,474 | ) | | 219 |
|
| Net income in stockholders' equity | | — |
| | — |
| | — |
| | — |
| | — |
| | 2,278 |
| | — |
| | 36 |
|
| Other comprehensive income, net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 555 |
| | 35 |
|
| Stock-based awards exercised or vested | | — |
| | — |
| | (5 | ) | | (1,926 | ) | | 125 |
| | — |
| | — |
| | — |
|
| Shares repurchased | | — |
| | — |
| | — |
| | 7,388 |
| | (927 | ) | | — |
| | — |
| | — |
|
| Recognition of stock-based compensation | | — |
| | — |
| | 76 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Dividends declared | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,371 | ) | | — |
| | (37 | ) |
| Other | | — |
| | — |
| | 8 |
| | — |
| | — |
| | (8 | ) | | — |
| | — |
|
| Balance at December 31, 2017 | | 378,597 |
| | $ | 473 |
| | $ | 776 |
| | 27,491 |
| | $ | (4,431 | ) | | $ | 6,730 |
| | $ | (2,919 | ) | | $ | 253 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | — | | | — | | | — | | | — | | | — | | | 2,352 | | | — | | | 41 | | | 2,393 | |
| Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | 121 | | | 12 | | | 133 | |
| Stock-based awards exercised or vested | | — | | | — | | | (55) | | | (2,339) | | | 271 | | | — | | | — | | | — | | | 216 | |
| Shares repurchased | | — | | | — | | | — | | | 5,063 | | | (716) | | | — | | | — | | | — | | | (716) | |
| Recognition of stock-based compensation | | — | | | — | | | 142 | | | — | | | — | | | — | | | — | | | — | | | 142 | |
| Dividends declared ($4.28 per share) | | — | | | — | | | — | | | — | | | — | | | (1,458) | | | — | | | (36) | | | (1,494) | |
| Other | | — | | | — | | | 14 | | | — | | | — | | | (13) | | | 1 | | | (1) | | | 1 | |
| 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 | | — | | | — | | | — | | | — | | | — | | | 1,814 | | | — | | | 29 | | | 1,843 | |
| Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (67) | | | (14) | | | (81) | |
| Stock-based awards exercised or vested | | — | | | — | | | (80) | | | (1,339) | | | 146 | | | — | | | — | | | — | | | 66 | |
| Shares repurchased | | — | | | — | | | — | | | 3,228 | | | (430) | | | — | | | — | | | — | | | (430) | |
| Recognition of stock-based compensation | | — | | | — | | | 26 | | | — | | | — | | | — | | | — | | | — | | | 26 | |
| Dividends declared ($4.56 per share) | | — | | | — | | | — | | | — | | | — | | | (1,538) | | | — | | | (36) | | | (1,574) | |
| Other | | — | | | — | | | 2 | | | — | | | — | | | 15 | | | — | | | 1 | | | 18 | |
| 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 | | — | | | — | | | — | | | — | | | — | | | 1,934 | | | — | | | 38 | | | 1,972 | |
| Other comprehensive income, net of tax, excludes redeemable interests' share | | — | | | — | | | — | | | — | | | — | | | — | | | (429) | | | (9) | | | (438) | |
| Stock-based awards exercised or vested | | — | | | — | | | (86) | | | (1,406) | | | 145 | | | — | | | — | | | — | | | 59 | |
| Shares repurchased | | — | | | — | | | — | | | 779 | | | (100) | | | — | | | — | | | — | | | (100) | |
| Recognition of stock-based compensation | | — | | | — | | | 147 | | | — | | | — | | | — | | | — | | | — | | | 147 | |
Dividends declared ($4.64 per share) | | — | | | — | | | — | | | — | | | — | | | (1,566) | | | — | | | (98) | | | (1,664) | |
| Other | | — | | | — | | | 13 | | | — | | | 1 | | | (25) | | | (1) | | | (1) | | | (13) | |
| Balance at December 31, 2022 | | 378,597 | | | $ | 473 | | | $ | 679 | | | 41,135 | | | $ | (5,137) | | | $ | 8,201 | | | $ | (3,669) | | | $ | 153 | | | $ | 700 | |
See notes to the consolidated financial statements.
|
| | | | | | | |
| 2933 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTSTATEMENTS
|
| | | | | | | | | | | | |
| | | Year Ended December 31 |
| (Millions of dollars) | | 2017 | | 2016 | | 2015 |
| Operating Activities | | | | | | |
| Net income | | $ | 2,319 |
| | $ | 2,219 |
| | $ | 1,066 |
|
| Depreciation and amortization | | 724 |
| | 705 |
| | 746 |
|
| Stock-based compensation | | 76 |
| | 77 |
| | 75 |
|
| Deferred income taxes | | (69 | ) | | (15 | ) | | (255 | ) |
| Equity companies' earnings (in excess of) less than dividends paid | | 26 |
| | (4 | ) | | (10 | ) |
| Operating working capital | | (148 | ) | | 334 |
| | (445 | ) |
| Postretirement benefits | | 2 |
| | (50 | ) | | 930 |
|
| Adjustments related to Venezuelan operations | | — |
| | (11 | ) | | 153 |
|
| Other | | (1 | ) | | (23 | ) | | 46 |
|
| Cash Provided by Operations | | 2,929 |
| | 3,232 |
| | 2,306 |
|
| Investing Activities | | | | | | |
| Capital spending | | (785 | ) | | (771 | ) | | (1,056 | ) |
| Investments in time deposits | | (214 | ) | | (221 | ) | | (146 | ) |
| Maturities of time deposits | | 183 |
| | 188 |
| | 164 |
|
| Other | | (35 | ) | | 72 |
| | (12 | ) |
| Cash Used for Investing | | (851 | ) | | (732 | ) | | (1,050 | ) |
| Financing Activities | | | | | | |
| Cash dividends paid | | (1,359 | ) | | (1,311 | ) | | (1,272 | ) |
| Change in short-term debt | | 360 |
| | (908 | ) | | 303 |
|
| Debt proceeds | | 937 |
| | 1,293 |
| | 1,100 |
|
| Debt repayments | | (1,481 | ) | | (598 | ) | | (553 | ) |
| Proceeds from exercise of stock options | | 121 |
| | 107 |
| | 140 |
|
| Acquisitions of common stock for the treasury | | (911 | ) | | (739 | ) | | (861 | ) |
| Shares purchased from noncontrolling interest | | — |
| | — |
| | (151 | ) |
| Other | | (88 | ) | | (29 | ) | | (4 | ) |
| Cash Used for Financing | | (2,421 | ) | | (2,185 | ) | | (1,298 | ) |
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | | 36 |
| | (11 | ) | | (128 | ) |
| Change in Cash and Cash Equivalents | | (307 | ) | | 304 |
| | (170 | ) |
| Cash and Cash Equivalents - Beginning of Year | | 923 |
| | 619 |
| | 789 |
|
| Cash and Cash Equivalents - End of Year | | $ | 616 |
| | $ | 923 |
| | $ | 619 |
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31 |
| (Millions of dollars) | | 2022 | | 2021 | | 2020 |
| Operating Activities | | | | | | |
| Net income | | $ | 1,961 | | | $ | 1,844 | | | $ | 2,396 | |
| Depreciation and amortization | | 754 | | | 766 | | | 796 | |
| Asset impairments | | — | | | 3 | | | 17 | |
| Gain on previously held equity investment in Thinx | | (85) | | | — | | | — | |
| Stock-based compensation | | 150 | | | 26 | | | 147 | |
| Deferred income taxes | | (57) | | | (70) | | | 45 | |
| Net (gains) losses on asset dispositions | | 15 | | | 39 | | | 68 | |
| Equity companies' earnings (in excess of) less than dividends paid | | 6 | | | 25 | | | (30) | |
| Operating working capital | | (17) | | | 46 | | | 363 | |
| Postretirement benefits | | (4) | | | 47 | | | (28) | |
| Other | | 10 | | | 4 | | | (45) | |
| Cash Provided by Operations | | 2,733 | | | 2,730 | | | 3,729 | |
| Investing Activities | | | | | | |
| Capital spending | | (876) | | | (1,007) | | | (1,217) | |
| Acquisition of business, net of cash acquired | | (46) | | | — | | | (1,083) | |
| Proceeds from dispositions of property | | 12 | | | 43 | | | 31 | |
| Investments in time deposits | | (658) | | | (918) | | | (753) | |
| Maturities of time deposits | | 797 | | | 836 | | | 690 | |
| Other | | (14) | | | (10) | | | 27 | |
| Cash Used for Investing | | (785) | | | (1,056) | | | (2,305) | |
| Financing Activities | | | | | | |
| Cash dividends paid | | (1,558) | | | (1,516) | | | (1,451) | |
| Change in short-term debt | | 261 | | | (97) | | | (561) | |
| Debt proceeds | | — | | | 605 | | | 1,845 | |
| Debt repayments | | (312) | | | (269) | | | (854) | |
| Proceeds from exercise of stock options | | 94 | | | 65 | | | 217 | |
| Acquisitions of common stock for the treasury | | (100) | | | (400) | | | (700) | |
| Cash dividends paid to noncontrolling interests | | (98) | | | (36) | | | (37) | |
| Other | | (47) | | | (48) | | | (26) | |
| Cash Used for Financing | | (1,760) | | | (1,696) | | | (1,567) | |
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | | (31) | | | (11) | | | 4 | |
| Change in Cash and Cash Equivalents | | 157 | | | (33) | | | (139) | |
| Cash and Cash Equivalents - Beginning of Year | | 270 | | | 303 | | | 442 | |
| Cash and Cash Equivalents - End of Year | | $ | 427 | | | $ | 270 | | | $ | 303 | |
See notes to the consolidated financial statements.
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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
Basis of Presentation
The consolidated financial statements present the accounts of Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest as if they were a single economic entity in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany transactions and accounts are eliminated in consolidation. The terms "Corporation," "Kimberly-Clark," "we," "our," and "us" refer to Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in these estimates are recorded when known. Estimates are used in accounting for, among other things, sales incentives and trade promotion allowances, employee postretirement benefits, and deferred income taxes and potential assessments.
Cash Equivalents
Cash equivalents are short-term investments with an original maturity date of three months or less.
Inventories and Distribution Costs
Most U.S. inventories are valued at the lower of cost, using the Last-In, First-Out ("LIFO") method, or market. The balance of the U.S. inventories and inventories of consolidated operations outside the U.S. are valued at the lower of cost or net realizable value using either the First-In, First-Out ("FIFO") or weighted-average cost methods. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Distribution costs are classified as cost of products sold.
Property and Depreciation
Property, plant and equipment are stated at cost and are depreciated on the straight-line method. Buildings are depreciated over their estimated useful lives, primarily 40 years. Machinery and equipment are depreciated over their estimated useful lives, primarily ranging from 16 to 20 years. Purchases of computer software, including external costs and certain internal costs (including payroll and payroll-related costs of employees) directly associated with developing significant computer software applications for internal use, are capitalized. Computer software costs are amortized on the straight-line method over the estimated useful life of the software, which generally does not exceed 5 years.
Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group, which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using discounted cash flows or independent appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss on the transaction is included in income.
Goodwill and Other Intangible Assets
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not amortized, but rather is assessed for impairment annually and whenever events and circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit carrying amount, ofincluding goodwill, with its fair value. If the reporting unit carrying amount, ofincluding goodwill, exceeds its fair value, ana goodwill impairment charge for the excess amount above fair value would be recorded. In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as macroeconomic, industry and competitive conditions, legal and regulatory environments, historical and
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projected financial performance, significant changes in the reporting unit and
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the magnitude of excess fair value over carrying amount from the previous quantitative impairment testing. If the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test using discounted cash flows to estimate fair value must be performed. On the other hand,Alternatively, if the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is more than its carrying value, then further quantitative testing is not required. For 2017,2022, we completed the required annual assessment of goodwill for impairment for all of our reporting units using a qualitative assessment as of the first day of the third quarter, and we determined that it is more likely than not that the fair value of goodwill significantly exceeds the carrying amount for each of our reporting units.
Indefinite-lived intangible assets, other than goodwill, consist of certain brand names related to our acquisition of Softex Indonesia and are tested for impairment annually at the same time as our goodwill impairment assessment and whenever events and circumstances indicate that impairment may have occurred. Our estimate of the fair value of our brand assets is based on a discounted cash flow model and a market-based approach using inputs which include projected revenues from our long-range plan, assumed royalty rates that could be payable if we did not own the brands, and a discount rate. For 2022, we completed the required annual assessment of indefinite-lived intangible assets, other than goodwill, for impairment using a qualitative assessment as of the first day of the third quarter, and we determined that it is more likely than not that the fair value is more than the carrying amount for each of our reporting units. these intangible assets.
Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use of the asset are less than its carrying amount.An impairment loss would be measured as the difference between the fair value (based on discounted future cash flows) and the carrying amount of the asset. Estimated useful lives range from 210 to 20 years for trademarks and 54 to 1520 years for patents, developed technologiescertain acquired distributor and other intangible assets.customer relationships.
Investments in Equity Companies
Investments in companies which we do not control but over which we have the ability to exercise significant influence and that, in general, are at least 20 percent-owned by us, are stated at cost plus equity in undistributed net income. These investments are evaluated for impairment when warranted. An impairment loss would be recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other than temporary. In judging "other than temporary," we would consider the length of time and extent to which the fair value of the equity company investment has been less than the carrying amount, the near-term and longer-term operating and financial prospects of the equity company, and our longer-term intent of retaining the investment in the equity company.
Revenue Recognition
Sales revenue is recognized at the time of product shipment or delivery, depending on when titlecontrol passes, to unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and collection is reasonably assured. Sales are reported net of returns, consumer and trade promotions, rebates and freight allowed. Taxes imposed by governmental authorities on our revenue-producing activities with customers, such as sales taxes and value-added taxes, are excluded from net sales.
Sales Incentives and Trade Promotion Allowances
The cost of promotion activities provided to customers is classified as a reduction in sales revenue. In addition, the estimated redemption value of consumer coupons and related expense are recorded when the related revenue from customers is recorded at the time the coupons are issued and classified as a reduction in sales revenue.realized. Rebate and promotion accruals are based on estimates of the quantity of customer sales. Promotion accruals also consider estimates of the number of consumer coupons that will be redeemed and timing and costs of activities within the promotional programs.
Advertising Expense
Advertising costs are expensed in the year the related advertisement or campaign is first presented by thethrough traditional or digital media. For interim reporting purposes, advertising expenses are charged to operations as a percentage of sales based on estimated sales and related advertising expense for the full year.
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Research Expense
Research and development costs are charged to expense as incurred.
Other Income
Certain amounts not directly associated with the current operations of the business are recorded in Other (income) and expense, net. In the first quarter of 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 upon the acquisition of a controlling interest in Thinx Inc. ("Thinx"). See Note 3 for details on the acquisition of Thinx.
In the fourth quarter of 2020, we received a favorable legal ruling that resolved certain matters related to prior years’ business taxes in Brazil. These matters involved the revenue base, which included value added taxes, used to calculate and pay social security taxes for the period 2004 to 2014. In the legal ruling, the São Paulo State Court recognized our right to exclude the value added taxes from the revenue base used to calculate those social security taxes. This decision resulted in business tax credits being recognized of $77.
Foreign Currency Translation
The income statements of foreign operations, other than those in highly inflationary economies, are translated into U.S. dollars at rates of exchange in effect each month. The balance sheets of these operations are translated at period-end exchange rates, and the differences from historical exchange rates are reflected in stockholders' equity as unrealized translation adjustments. Under highly inflationary accounting, the countries' functional currency becomes the U.S. dollar, and its income statement and balance sheet are measured in U.S. dollar using both current and historical rates of exchange.
AccountingAs of July 1, 2018, we elected to adopt highly inflationary accounting for Venezuelan Operations
Effective December 31, 2015, we deconsolidated theour subsidiaries in Argentina (“K-C Argentina”). 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 December 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 in 2022, 2021 and 2020.
As of April 1, 2022, we elected to adopt highly inflationary accounting for our subsidiary in Turkey (“K-C Turkey”). The effect of changes in exchange rates on lira-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material. As of December 31, 2022, K-C Turkey had a small net lira monetary position. Net sales of K-C Turkey were less than 1 percent of our business in Venezuela from our consolidated balance sheet. The change resulted in the recognition of an after tax charge of $102 in 2015 and other income of $11 related to
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an updated assessment in 2016. In addition, we recorded a non-deductible charge of $45 in 2015 related to a balance sheet remeasurement. In 2016, we wrote off our investment in K-C Venezuela and shut down operations in that country.net sales.
Derivative Instruments and Hedging
Our policies allow the use of derivatives for risk management purposes and prohibit their use for speculation. Our policies also prohibit the use of any leveraged derivative instrument. Consistent with our policies, foreign currency derivative instruments, interest rate swaps and locks, and the majority of commodity hedging contracts are entered into with major financial institutions. At inception, we formally designate certain derivatives as cash flow, fair value or net investment hedges and establish how the effectiveness of these hedges will be assessed and measured. This process links the derivatives to the transactions or financial balances they are hedging. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings as they occur. All derivative instruments are recorded as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are either recorded in the income statement or other comprehensive income, as appropriate. The gain or loss on derivatives designated as fair value hedges and the offsetting loss or gain on the hedged item attributable to the hedged risk are included in income in the period that changes in fair value occur. The effective portion of the gain or loss on derivatives designated as cash flow hedges is included in other comprehensive income in the period that changes in fair value occur, and is reclassified to income in the same period that the hedged item affects income. The gain or loss on derivatives designated as hedges of investments in foreign subsidiaries is recognized in other comprehensive income to offset the change in value of the net investments being hedged. Any ineffective portion of cash flow hedges and net investment hedges is immediately recognized in income. Certain foreign-currency derivative instruments not designated as hedging instruments have been entered into to manage certain non-functional currency denominated monetary assets and liabilities. The gain or loss on these derivatives is included in income in the period that changes in their fair values occur. Cash flows from derivatives are classified within the consolidated statement of cash flows in the same category as the items being hedged. Cash flows from derivatives are classified within Operating Activities, except for derivatives designated as net investment hedges which are classified in Investing Activities. See Note 1012 for disclosures about derivative instruments and hedging activities.
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Leases
Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.
Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.
Certain lease agreements with lease and nonlease components are combined as a single lease component. The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Accounting Standards - Adopted as of January 1, 2017
In 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation-Stock Compensation (Topic 718). The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted this standard as of January 1, 2017. The adoption did not have a material impact on our financial position, results of operations or cash flows. Prior periods were not recast.
In 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force),providing guidance on eight specific cash flow statement classification matters. We early adopted this standard as of January 1, 2017. The adoption of this standard did not have a material impact on our cash flow statement. Prior periods were not recast.
Accounting StandardsStandard Issued - Not Adopted as of December 31, 20172022
In 2014,2022, the FASBFinancial Accounting Standards Board issued ASUAccounting Standard Update (“ASU”) No. 2014-09, Revenue2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50). The new guidance requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of the financial statements to understand the program’s nature, activity during the period, changes from Contracts with Customers, which provides a single comprehensive model for entitiesperiod to use in accounting for revenue arising from contracts with customersperiod, and will supersede most current revenue recognition guidance. In 2016, the FASB issued four amendments to the ASU. The standard is effective for public companies for annual and interim periods beginning after December 15, 2017.potential magnitude. We adopted this ASU effective January 1, 2018. The guidance is required to be adopted on either a full or modified retrospective basis. As this standard did not have a material impact on our financial position, results of operations or cash flows on either a full or modified retrospective basis, we will not recast prior periods.
In 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The ASU is effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. The ASU is to be applied on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption. We adopted this standard as of January 1, 2018. The impact of this standard2023 on our financial position, results of operations or cash flows was not material.
In 2017,a prospective basis. As the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715), Improvingguidance requires only additional disclosures, the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The standard requires that an employer report the service cost component in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of operating profit. The standard is effective for public companies for annual periods
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beginning after December 15, 2017, including interim periods within those annual periods. We adopted this standard as of January 1, 2018. Prior periods will be recast. See Note 6 for more information about the net periodic benefit cost for pensions and other postretirement benefits and related service cost for the years ended December 31, 2017, 2016 and 2015.
In 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The ASU requires additional disclosures. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The ASU requires adoption based upon a modified retrospective transition approach. We will adopt this standard as of January 1, 2019. The effects of this standard on our financial position, results of operations orand cash flows arewere not yet known.material.
In 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period. The effects of this standard on our financial position, results of operations or cash flows are not yet known.
Note 2. 2014 Organization2018 Global Restructuring Program
In 2014,2018, we initiated aour 2018 Global Restructuring Program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. The restructuring planactions were completed in order to improve organization efficiency2021. We closed or sold 11 manufacturing facilities and offset the impact of stranded overhead costs resulting from the spin-offexpanded production capacity at several others. We exited or divested some lower-margin businesses that generated approximately 1 percent of our health care business. The restructuring was intended to improve our underlying profitability and increase our flexibility to invest in targeted growth initiatives, brand building and other capabilities critical to delivering future growth.net sales. Workforce reductions were approximately 6,000. The restructuring impacted all of our business segments and our organizations in all major geographies.
The restructuring actions were completed by December 31, 2016, with total costs of $2.2 billion pre-tax ($1.6 billion after tax). Pre-tax cash and non-cash costs of $1.2 billion and $1.0 billion, respectively, were incurred.
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The following net charges were incurred in connection with the 2018 Global Restructuring Program:
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| Year Ended December 31 |
| 2021 | | 2020 | | 2019 | | 2018 | | Total |
| Cost of products sold: | | | | | | | | | |
| Charges for workforce reductions | $ | 4 | | | $ | 10 | | | $ | 31 | | | $ | 149 | | | $ | 194 | |
| Asset impairments | 3 | | | 17 | | | — | | | 74 | | | 94 | |
| Asset write-offs | 17 | | | 63 | | | 54 | | | 112 | | | 246 | |
| Incremental depreciation | 18 | | | 94 | | | 235 | | | 172 | | | 519 | |
| Other exit costs | 112 | | | 99 | | | 96 | | | 34 | | | 341 | |
| Total | 154 | | | 283 | | | 416 | | | 541 | | | 1,394 | |
| Marketing, research and general expenses: | | | | | | | | | |
| Charges for workforce reductions | 39 | | | 13 | | | (12) | | | 243 | | | 283 | |
| Other exit costs | 72 | | | 96 | | | 111 | | | 137 | | | 416 | |
| Total | 111 | | | 109 | | | 99 | | | 380 | | | 699 | |
Other (income) and expense, net(a) | 10 | | | (9) | | | (194) | | | (12) | | | (205) | |
Nonoperating expense(b) | 79 | | | 36 | | | 45 | | | 127 | | | 287 | |
| Total charges | 354 | | | 419 | | | 366 | | | 1,036 | | | 2,175 | |
| Provision for income taxes | (75) | | | (94) | | | (118) | | | (243) | | | (530) | |
| Net charges | 279 | | | 325 | | | 248 | | | 793 | | | 1,645 | |
Net impact related to equity companies and
noncontrolling interests | 2 | | | (2) | | | — | | | (10) | | | (10) | |
Net charges attributable to Kimberly-Clark
Corporation | $ | 281 | | | $ | 323 | | | $ | 248 | | | $ | 783 | | | $ | 1,635 | |
(a)Other (income) and expense, net in 2019 was the result of pre-tax gains on the sales of manufacturing facilities and associated real estate which were disposed of as part of the restructuring.
(b)Represents non-cash pension settlement and curtailment charges resulting from restructuring actions, primarily severance,in the U.S., United Kingdom and Canada.
The measurement of $164the asset impairment charges was based on the excess of the carrying values of the impacted asset groups over their fair values. These fair values were measured by using discounted cash flows expected over the limited time the assets would remain in use or the expected sales value, and as a result, the assets were essentially written off or written down to fair value less costs to sell. The use of discounted cash flows represents a level 3 measure under the fair value hierarchy.
The following summarizes the restructuring liabilities activity:
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| | 2021 | | |
| Restructuring liabilities at January 1 | | $ | 93 | | | |
| Charges for workforce reductions and other cash exit costs | | 222 | | | |
| Cash payments | | (235) | | | |
| Currency and other | | (2) | | | |
| Restructuring liabilities at December 31 | | $ | 78 | | | |
As of December 31, 2022, remaining restructuring liabilities were not material. As of December 31, 2021, restructuring liabilities of $75 were recorded in Accrued expenses and other current liabilities and $3 were recorded in Other Liabilities. The impact related to restructuring charges was recorded in Operating working capital and Other Operating Activities, as appropriate, in our consolidated cash flow statement. Cash payments of $249, $302 and $325 were made during 2020, 2019 and 2018, respectively.
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Note 3. Acquisitions
2022 Thinx Acquisition
On February 24, 2022, we completed our acquisition of a majority and controlling share of 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.
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 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 primary 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 value similar identifiable intangible assets in the Consumer Packaged Goods industry. All of the 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 make 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 market participants.
The total purchase price consideration was allocated to the net assets acquired based upon their respective estimated fair values as follows:
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| Current assets | | $ | 28 | |
| Property, Plant and Equipment, Net | | 2 | |
| Goodwill | | 297 | |
| Other Intangible Assets, Net | | 123 | |
| Other assets | | 4 | |
| Current liabilities | | (17) | |
| Deferred income taxes | | (18) | |
| Other liabilities | | (4) | |
| Fair value of net assets acquired | | 415 | |
| | |
| Less fair value of noncontrolling 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 December 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 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 preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the 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 first quarter of 2023.
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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 year ended December 31, 2022.
Pro forma results of operations have not been presented as the impact on our consolidated financial statements is not material.
2020 Softex Indonesia Acquisition
On October 1, 2020 (“Acquisition Date”), we acquired Softex Indonesia, a leader in the fast-growing Indonesian personal care market, in an all-cash transaction for approximately $1.2 billion. This transaction significantly expands our presence in an important developing and emerging market and is a strong strategic fit with our core business. The transaction price, subject to working capital and net debt adjustments, resulted in a final purchase price of $1.1 billion in addition to the assumption of certain indebtedness of Softex Indonesia at closing. During the year ended December 31, 2020, we recorded transaction and integration costs of $32 in Marketing, research and general expenses.
During the fourth quarter of 2020, we substantially completed and recorded an initial purchase price allocation, in which we utilized several generally accepted valuation methodologies to determine the fair value of certain acquired assets. The primary valuation methods included the replacement cost approach, sales comparison approach, discounted cash flow, multi-period excess earnings, relief from royalty and distributor methods. The purchase price allocation was finalized by October 2021 and included an immaterial amount of recorded measurement period adjustments. The measurement period adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed as of the Acquisition Date.
Goodwill of $404 was allocated to the Personal Care business segment. The goodwill is primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. While the goodwill is not deductible for local tax ($231 pre-tax)purposes, it is treated as an amortizable expense for the U.S. global intangible low-taxed income ("GILTI") computation.
The consolidated results of operations for Softex Indonesia are reported primarily in our Personal Care business segment on a one-month lag.
Note 4. Charges were $27Goodwill and $42 after tax ($35 and $63 pre-tax)Other Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 20162022 and 2015, respectively. Cash payments2021 were as follows:
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| Personal Care | | Consumer Tissue | | K-C Professional | | Total |
| Balance as of December 31, 2020 | $ | 984 | | | $ | 519 | | | $ | 392 | | | $ | 1,895 | |
| Acquisition | 14 | | | — | | | — | | | 14 | |
| Effect of foreign currency translation | (37) | | | (25) | | | (7) | | | (69) | |
| Balance as of December 31, 2021 | 961 | | | 494 | | | 385 | | | 1,840 | |
| Acquisition | 304 | | | — | | | — | | | 304 | |
| Effect of foreign currency translation | (60) | | | (6) | | | (4) | | | (70) | |
| Balance as of December 31, 2022 | $ | 1,205 | | | $ | 488 | | | $ | 381 | | | $ | 2,074 | |
The changes in the carrying amount of $60Other Intangible Assets, Net for the years ended December 31, 2022 and $862021 were made during 2016as follows:
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| | December 31 |
| | 2022 | | 2021 |
| | Gross Carrying Amount(b) | | Accumulated Amortization(b) | | Net Carrying Amount | | Gross Carrying Amount(b) | | Accumulated Amortization(b) | | Net Carrying Amount |
| Intangible assets with indefinite lives: | | | | | | | | | | | | |
| Brand names | | $ | 610 | | | $ | — | | | $ | 610 | | | $ | 666 | | | $ | — | | | $ | 666 | |
| Intangibles assets with finite lives: | | | | | | | | | | | | |
| Trademarks and brand names | | 253 | | | (91) | | | 162 | | | 140 | | | (82) | | | 58 | |
Other intangible assets(a) | | 98 | | | (19) | | | 79 | | | 103 | | | (17) | | | 86 | |
| Total intangible assets with finite lives | | 351 | | | (110) | | | 241 | | | 243 | | | (99) | | | 144 | |
| Total | | $ | 961 | | | $ | (110) | | | $ | 851 | | | $ | 909 | | | $ | (99) | | | $ | 810 | |
(a) Other intangible assets primarily include customer and 2015, respectively, relateddistributor relationships.
(b) Amounts subject to foreign currency adjustments.
Amortization expense relating to the restructuring.intangible assets with finite lives was $15, $9 and $2 for the three years ended December 31, 2022, 2021 and 2020, respectively. Based on the carrying values of the intangible assets with finite lives as of December 31, 2022, amortization expense for each of the next five years is estimated to be approximately $17.
Note 3.5. 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 20172022 and 2016,2021, there were no significant transfers amongto or from level 1, 2 or 3 fair value determinations.
Derivative assets and liabilities are measured on a recurring basis at fair value. At December 31, 20172022 and 2016,2021, derivative assets were $27$99 and $43,$65, respectively, and derivative liabilities were $51$318 and $46,$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 NYMEXcommodity 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. See Note 1012 for additional information on our use of derivative instruments.
Redeemable common and preferred securities of subsidiaries are measured on a recurring basis at their estimated redemption values, which approximates fair valuevalue. As of December 31, 2022 and 2021, the securities were $61valued at $258 and $58$26 respectively. No redeemable common securities were outstanding at December 31, 2017 and 2016, respectively. They2021. The securities are not traded in active markets. For certain redeemable securities, fair values were calculated using a floating rate pricing model that compared the stated spread to the fair value spread to determine the price at
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| 34 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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which each of the financial instruments should trade. The model used the following inputs to calculate fair values: face value, current LIBOR rate, unobservable fair value credit spread, stated spread, maturity datemarkets, and interest or dividend payment dates. The fair value of the remaining redeemable securities was based on various inputs, including an independent third-party appraisal, adjusted for current market conditions. Measurement of the redeemable preferred securitiestheir 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 $68$63 and $61$72 at December 31, 20172022 and 2016,2021, 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.
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| 42 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
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 |
| | December 31, 2022 | | December 31, 2021 |
| Assets | | | | | | | | | |
Cash and cash equivalents(a) | 1 | | $ | 427 | | | $ | 427 | | | $ | 270 | | | $ | 270 | |
Time deposits(b) | 1 | | 268 | | | 268 | | | 416 | | | 416 | |
| Liabilities | | | | | | | | | |
Short-term debt(c) | 2 | | 373 | | | 373 | | | 118 | | | 118 | |
Long-term debt(d) | 2 | | 8,049 | | | 7,403 | | | 8,456 | | | 9,492 | |
|
| | | | | | | | | | | | | | | | | |
| |
Fair Value Hierarchy Level | | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
| | | December 31, 2017 | | December 31, 2016 |
| Assets | | | | | | | | | |
Cash and cash equivalents(a) | 1 | | $ | 616 |
| | $ | 616 |
| | $ | 923 |
| | $ | 923 |
|
Time deposits and other(b) | 1 | | 185 |
| | 185 |
| | 138 |
| | 138 |
|
| Liabilities | | | | | | | | | |
Short-term debt(c) | 2 | | 547 |
| | 547 |
| | 170 |
| | 170 |
|
Long-term debt(d) | 2 | | 6,878 |
| | 7,398 |
| | 7,402 |
| | 7,886 |
|
| |
(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. |
(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 4.6. Debt and Redeemable Common and Preferred Securities of Subsidiaries
Long-term debt is composed of the following:
| | | | Weighted- Average Interest Rate | | Maturities | | December 31 | | Weighted-
Average
Interest
Rate | | Maturities | | December 31 |
| | 2017 | | 2016 | | 2022 | | 2021 |
| Notes and debentures | 3.7% | | 2018 - 2047 | | $ | 6,577 |
| | $ | 7,101 |
| Notes and debentures | 3.3% | | 2023 - 2050 | | $ | 7,825 | | | $ | 8,198 | |
| Industrial development revenue bonds | 1.6% | | 2018 - 2045 | | 264 |
| | 264 |
| Industrial development revenue bonds | 4.6% | | 2023 - 2045 | | 169 | | | 169 | |
| Bank loans and other financings in various currencies | 7.3% | | 2018 - 2028 | | 37 |
| | 37 |
| Bank loans and other financings in various currencies | 2.5% | | 2023 - 2051 | | 55 | | | 89 | |
| Total long-term debt | | 6,878 |
| | 7,402 |
| Total long-term debt | | 8,049 | | | 8,456 | |
| Less current portion | | 406 |
| | 963 |
| Less current portion | | 471 | | | 315 | |
| Long-term portion | | $ | 6,472 |
| | $ | 6,439 |
| Long-term portion | | $ | 7,578 | | | $ | 8,141 | |
Scheduled maturities of long-term debt for the next five years are $407$472 in 2018, $7142023, $524 in 2019, $7602024, $550 in 2020, $2512025, $396 in 20212026 and $298$595 in 2022.2027.
In December 2017,October 2021, we redeemed $500issued $600 aggregate principal amount of 7.50%2.00% notes originally due November 1, 2018. As a result, we recognized a charge of $24 in other (income) and expense, net.
In September 2017, we issued €500 aggregate principal amount of 0.625% notes due September 7, 2024. Proceeds from the offering were used to repay a portion of our outstanding commercial paper indebtedness.
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| 35 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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In May 2017, we issued $350 aggregate principal amount of 3.90% notes due May 4, 2047.2, 2031. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding commercial paper indebtedness.
In July 2016, we issued $500 aggregate principal amount of 3.20% notes due July 30, 2046. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding commercial paper indebtedness.
In February 2016, we issued $400 aggregate principal amount of 1.40% notes due February 15, 2019 and $400 aggregate principal amount of 2.75% notes due February 15, 2026. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding notes and commercial paper indebtedness.
In August 2015, we issued $250 aggregate principal amount of 2.15% notes due August 2020 and $300 aggregate principal amount of 3.05% notes due August 2025. Proceeds from the offering were used to repay $300 of notes due in August 2015 and to pay down a portion of our outstanding commercial paper balance.
In February 2015, we issued $250 aggregate principal amount of 1.85% notes due March 2020 and $250 aggregate principal amount of 2.65% notes due March 2025. Proceeds from the offering were used for general corporate purposes, including pension contribution payments.purposes.
We maintain a $2.0 billion revolving credit facility which expires in 2021. ThisJune 2026 and a $775 revolving credit facility which expires in June 2023. These facilities, currently unused, supportssupport our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.
Outstanding redeemable common securities represent the share of Thinx equity attributable to the third-party minority owner of Thinx. Our subsidiary in Central America has outstanding redeemable preferred securities that are held by a noncontrolling interest and another noncontrolling interest holds certain redeemable preferred securities issued by one of our subsidiaries in North America.non-controlling interest.
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| 43 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Note 5.7. Stock-Based Compensation
We have a stock-based Equity Participation Plan and an Outside Directors' Compensation Plan (the "Plans"), under which we can grant stock options, restricted shares and restricted share units to employees and outside directors. As of December 31, 2017,2022, the number of shares of common stock available for grants under the Plans aggregated 169.5 million shares.
Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant, and they have a term of 10 years. Stock options are subject to graded vesting whereby options vest 30 percent at the end of each of the first two 12-month periods following the grant and 40 percent at the end of the third 12-month period.
RestrictedTime-vested restricted share unit grants starting in 2022 are valued at the closing market price of our common stock on the grant date and are generally subject to a graded vesting whereby shares time-vestedvest 30 percent at the end of each of the first two 12-month periods following the grant and 40 percent at the end of the third 12-month period. Time-vested restricted share unit grants issued prior to 2022 or issued for special one-time awards, restricted shares units and performance-based restricted share units granted to employees are valued at the closing market price of our common stock on the grant date and vest generally at the end of three years. The number of performance-based share units that ultimately vest ranges from zero to 200 percent of the number granted based on performance. Beginning in 2021, performance metrics are tied to modified free cash flow and organic sales growth during the three-year performance period. Modified free cash flow and organic sales growth are set at the beginning of the performance period. Performance-based share units granted prior to 2021 are structured similarly but vest on performance tied to return on invested capital ("ROIC") and net sales during the three-year performance period. ROIC and net sales targets are set at the beginning of the performance period.sales. Restricted share units granted to outside directors are valued at the closing market price of our common stock on the grant date and vest when they are granted. The restricted period begins on the date of grant and expires on the date the outside director retires from or otherwise terminates service on our Board.
At the time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units on the same date and at the same rate as dividends are paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings.
Stock-based compensation costs of $76, $77$150, $26 and $75$147 and related deferred income tax benefits of $26, $28$33, $7 and $29$32 were recognized for 2017, 20162022, 2021 and 2015,2020, respectively.
The fair value of stock option awards was determined using a Black-Scholes-Merton option-pricing model utilizing a range of assumptions related to dividend yield, volatility, risk-free interest rate, and employee exercise behavior. Dividend yield is based on historical experience and expected future dividend actions. Expected volatility is based on a blend of historical volatility and implied volatility from traded options on Kimberly-Clark's common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate forfeitures based on historical data.
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| 36 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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The weighted-average fair value of options granted was estimated at $12.21, $10.95$21.28, $10.26 and $7.39,$15.92, in 2017, 20162022, 2021 and 2015,2020, respectively, per option on the date of grant based on the following assumptions:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| Dividend yield | 3.3 | % | | 3.9 | % | | 3.3 | % |
| Volatility | 22.1 | % | | 17.4 | % | | 21.9 | % |
| Risk-free interest rate | 2.8 | % | | 0.8 | % | | 0.3 | % |
| Expected life - years | 4.6 | | 4.6 | | 4.5 |
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| 44 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
|
| | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
| Dividend yield | 3.2 | % | | 3.1 | % | | 3.5 | % |
| Volatility | 15.6 | % | | 16.0 | % | | 13.4 | % |
| Risk-free interest rate | 1.8 | % | | 1.2 | % | | 1.5 | % |
| Expected life - years | 4.6 |
| | 4.6 |
| | 4.8 |
|
Total remaining unrecognized compensation costs and amortization period are as follows: |
| | | | | |
| | December 31, 2017 | | Weighted-Average Service Years |
| Nonvested stock options | $ | 12 |
| | 1.3 |
| Restricted shares and time-vested restricted share units | 6 |
| | 1.8 |
| Nonvested performance-based restricted share units | 45 |
| | 1.8 |
| | | | | | | | | | | |
| December 31, 2022 | | Weighted-Average
Service Years |
| Stock options | $ | 10 | | | 0.6 |
| Restricted shares and time-vested restricted share units | 51 | | | 1.4 |
| Performance-based restricted share units | 31 | | | 1.6 |
A summary of stock-based compensation is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | Shares
(in thousands) | | Weighted-Average
Exercise Price | | Weighted-Average
Remaining Contractual Term | | Aggregate Intrinsic
Value |
| Outstanding at January 1, 2022 | 5,596 | | | $ | 126.01 | | | | | |
| Granted | 655 | | | 116.28 | | | | | |
| Exercised | (842) | | | 113.00 | | | | | |
| Forfeited or expired | (292) | | | 127.70 | | | | | |
| Outstanding at December 31, 2022 | 5,117 | | | 126.81 | | | 5.73 | | $ | 52 | |
| Exercisable at December 31, 2022 | 3,658 | | | 125.03 | | | 4.74 | | $ | 42 | |
|
| | | | | | | | | | | | |
| Stock Options | Shares (in thousands) | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| Outstanding at January 1, 2017 | 6,793 |
| | $ | 101.16 |
| | | | |
| Granted | 1,605 |
| | 132.77 |
| | | | |
| Exercised | (1,323 | ) | | 91.04 |
| | | | |
| Forfeited or expired | (387 | ) | | 119.49 |
| | | | |
| Outstanding at December 31, 2017 | 6,688 |
| | 109.69 |
| | 7.61 | | $ | 100 |
|
| Exercisable at December 31, 2017 | 3,711 |
| | 95.93 |
| | 5.97 | | $ | 94 |
|
The total intrinsic value of options exercised during 2017, 20162022, 2021 and 20152020 was $48, $55$21, $16 and $83,$62, respectively.
| | | | | | | | | | | | | | | | | | | | | | | |
| Time-Vested
Restricted Share Units | | Performance-Based
Restricted Share Units |
| Other Stock-Based Awards | Shares
(in thousands) | | Weighted-
Average
Grant-Date
Fair Value | | Shares
(in thousands) | | Weighted-
Average
Grant-Date
Fair Value |
| Nonvested at January 1, 2022 | 393 | | | $ | 131.85 | | | 1,410 | | | $ | 131.03 | |
| Granted | 718 | | | 131.37 | | | 517 | | | 133.24 | |
| Vested | (172) | | | 131.00 | | | (672) | | | 124.43 | |
| Forfeited | (94) | | | 137.25 | | | (152) | | | 134.60 | |
| Nonvested at December 31, 2022 | 845 | | | 134.81 | | | 1,103 | | | 138.96 | |
|
| | | | | | | | | | | | | |
| | Time-Vested Restricted Share Units | | Performance-Based Restricted Share Units |
| Other Stock-Based Awards | Shares (in thousands) | | Weighted- Average Grant-Date Fair Value | | Shares (in thousands) | | Weighted- Average Grant-Date Fair Value |
| Nonvested at January 1, 2017 | 111 |
| | $ | 117.63 |
| | 1,642 |
| | $ | 116.53 |
|
| Granted | 73 |
| | 116.98 |
| | 628 |
| | 131.68 |
|
| Vested | (72 | ) | | 108.86 |
| | (544 | ) | | 112.16 |
|
| Forfeited | (10 | ) | | 119.08 |
| | (164 | ) | | 119.84 |
|
| Nonvested at December 31, 2017 | 102 |
| | 123.19 |
| | 1,562 |
| | 123.97 |
|
The total fair value of restricted share units that were distributed to participants during 2017, 20162022, 2021 and 20152020 was $80, $83$118, $100 and $99,$62, respectively.
Note 6.8. Employee Postretirement Benefits
Substantially all regular employees in the U.S. and the United Kingdom are covered by defined contribution retirement plans and certain U.S. and United Kingdom employees previously earned benefits covered by defined benefit pension plans that currently provide no future service benefit (the "Principal Plans") and/or defined contribution retirement plans.. Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for our qualified defined benefit pension plans is to contribute assets at least equal in amount to regulatory minimum requirements. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded.
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| 37 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. The annual increase in the consolidated weighted-average health care cost trend rate is expected to be 6.05.7 percent in 20182023 and to decline to 4.64.5 percent in 20282030 and thereafter. Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans. A one-percentage-point change in assumed health care trend rates would not have a significant effect on our financial results.
Effective January 2015, the U.S. pension plan was amended to include a lump-sum pension benefit payout option for certain plan participants. In addition, in April 2015, the U.S. pension plan completed the purchase of group annuity contracts that transferred to two insurance companies the pension benefit obligations totaling $2.5 billion for approximately 21,000 Kimberly-Clark retirees in the U.S. As a result of these changes, we recognizedrestructuring actions related to the 2018 Global Restructuring Program, aggregate pension settlement-relatedsettlement charges of $0.8 billion after tax ($1.4 billion pre-tax$91, and $49 during 2021 and 2020, respectively, and curtailment gains of $2 during 2021 were recognized in other (income) and Nonoperating
| | | | | | | | |
| 45 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
expense, net) during 2015. In 2015, we made cash contributions of $410primarily related to these changes to the U.S. plan.defined benefit pension plans in the U.S, Switzerland and the United Kingdom (see Note 2 for further information about the 2018 Global Restructuring Program).
Summarized financial information about postretirement plans, excluding defined contribution retirement plans, is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Benefits |
| Year Ended December 31 |
| 2022 | | 2021 | | 2022 | | 2021 |
| Change in Benefit Obligation | | | | | | | |
| Benefit obligation at beginning of year | $ | 3,811 | | | $ | 4,341 | | | $ | 669 | | | $ | 709 | |
| Service cost | 16 | | | 21 | | | 7 | | | 8 | |
| Interest cost | 89 | | | 80 | | | 21 | | | 19 | |
Actuarial (gain) loss(a) | (1,000) | | | (105) | | | (113) | | | (8) | |
| Currency and other | (197) | | | (54) | | | 2 | | | (3) | |
| Benefit payments from plans | (173) | | | (138) | | | — | | | — | |
| Direct benefit payments | (8) | | | (8) | | | (53) | | | (54) | |
| Settlements and curtailments | (97) | | | (326) | | | — | | | (2) | |
| Benefit obligation at end of year | 2,441 | | | 3,811 | | | 533 | | | 669 | |
| Change in Plan Assets | | | | | | | |
| Fair value of plan assets at beginning of year | 3,744 | | | 4,193 | | | — | | | — | |
| Actual return on plan assets | (987) | | | 52 | | | — | | | — | |
| Employer contributions | 30 | | | 10 | | | — | | | — | |
| Currency and other | (199) | | | (45) | | | — | | | — | |
| Benefit payments | (173) | | | (138) | | | — | | | — | |
| Settlements | (94) | | | (328) | | | — | | | — | |
| Fair value of plan assets at end of year | 2,321 | | | 3,744 | | | — | | | — | |
| Funded Status | $ | (120) | | | $ | (67) | | | $ | (533) | | | $ | (669) | |
|
| | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Change in Benefit Obligation | | | | | | | |
| Benefit obligation at beginning of year | $ | 4,126 |
| | $ | 3,959 |
| | $ | 758 |
| | $ | 717 |
|
| Service cost | 41 |
| | 42 |
| | 12 |
| | 11 |
|
| Interest cost | 129 |
| | 148 |
| | 32 |
| | 33 |
|
| Actuarial loss | 20 |
| | 501 |
| | 16 |
| | 41 |
|
| Currency and other | 221 |
| | (304 | ) | | (3 | ) | | 9 |
|
| Benefit payments from plans | (218 | ) | | (202 | ) | | — |
| | — |
|
| Direct benefit payments | (8 | ) |
| (15 | ) |
| (50 | ) |
| (53 | ) |
| Settlements | (15 | ) | | (3 | ) | | — |
| | — |
|
| Benefit obligation at end of year | 4,296 |
| | 4,126 |
| | 765 |
| | 758 |
|
| Change in Plan Assets | | | | | | | |
| Fair value of plan assets at beginning of year | 3,534 |
| | 3,508 |
| | — |
| | — |
|
| Actual return on plan assets | 333 |
| | 413 |
| | — |
| | — |
|
| Employer contributions | 53 |
| | 108 |
| | — |
| | — |
|
| Currency and other | 204 |
| | (290 | ) | | — |
| | — |
|
| Benefit payments | (218 | ) | | (202 | ) | | — |
| | — |
|
| Settlements | (9 | ) | | (3 | ) | | — |
| | — |
|
| Fair value of plan assets at end of year | 3,897 |
| | 3,534 |
| | — |
| | — |
|
| Funded Status | $ | (399 | ) | | $ | (592 | ) | | $ | (765 | ) | | $ | (758 | ) |
Substantially all of the funded status of pension and other benefits is recognized in the consolidated balance sheet in noncurrent employee benefits,Noncurrent Employee Benefits, with the remainder recognized in accruedAccrued expenses and other assets.current liabilities and Other Assets.
|
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| 38 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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Information for the Principal Plans and All Other Pension Plans
| | | | Principal Plans | | All Other Pension Plans | | Total | | Principal Plans | | All Other
Pension Plans | | Total |
| | Year Ended December 31 | | Year Ended December 31 |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Projected benefit obligation (“PBO”) | $ | 3,567 |
| | $ | 3,427 |
| | $ | 729 |
| | $ | 699 |
| | $ | 4,296 |
| | $ | 4,126 |
| Projected benefit obligation (“PBO”) | $ | 2,089 | | | $ | 3,339 | | | $ | 352 | | | $ | 472 | | | $ | 2,441 | | | $ | 3,811 | |
| Accumulated benefit obligation (“ABO”) | 3,513 |
| | 3,378 |
| | 658 |
| | 622 |
| | 4,171 |
| | 4,000 |
| Accumulated benefit obligation (“ABO”) | 2,089 | | | 3,339 | | | 305 | | | 408 | | | 2,394 | | | 3,747 | |
| Fair value of plan assets | 3,312 |
| | 3,011 |
| | 585 |
| | 523 |
| | 3,897 |
| | 3,534 |
| Fair value of plan assets | 2,018 | | | 3,389 | | | 303 | | | 355 | | | 2,321 | | | 3,744 | |
Approximately one-half of the PBO and fair value of plan assets for the Principal Plans relate to the U.S. qualified and nonqualified pension plans.
| | | | | | | | |
| 46 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Information for Pension Plans with an ABO in Excess of Plan Assets
| | | | | | | | | | | |
| December 31 |
| 2022 | | 2021 |
| ABO | $ | 1,251 | | | $ | 1,788 | |
| Fair value of plan assets | 1,089 | | | 1,616 | |
|
| | | | | | | |
| | December 31 |
| | 2017 | | 2016 |
| PBO | $ | 2,146 |
| | $ | 3,807 |
|
| ABO | 2,134 |
| | 3,736 |
|
| Fair value of plan assets | 1,699 |
| | 3,243 |
|
| | | | | | | | | | | |
| December 31 |
| 2022 | | 2021 |
| PBO | $ | 1,261 | | | $ | 1,835 | |
| Fair value of plan assets | 1,091 | | | 1,648 | |
Components of Net Periodic Benefit Cost
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Benefits |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 | | 2022 | | 2021 | | 2020 |
| Service cost | $ | 16 | | | $ | 21 | | | $ | 22 | | | $ | 7 | | | $ | 8 | | | $ | 8 | |
| Interest cost | 89 | | | 80 | | | 95 | | | 21 | | | 19 | | | 23 | |
Expected return on plan assets(a) | (123) | | | (132) | | | (134) | | | — | | | — | | | — | |
| Recognized net actuarial loss | 34 | | | 37 | | | 42 | | | 1 | | | 1 | | | 1 | |
| Settlements and curtailments | 52 | | | 89 | | | 49 | | | — | | | — | | | — | |
| Other | 1 | | | (5) | | | (4) | | | (1) | | | (2) | | | (2) | |
| Net periodic benefit cost | $ | 69 | | | $ | 90 | | | $ | 70 | | | $ | 28 | | | $ | 26 | | | $ | 30 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Service cost | $ | 41 |
| | $ | 42 |
| | $ | 38 |
| | $ | 12 |
| | $ | 11 |
| | $ | 12 |
|
| Interest cost | 129 |
| | 148 |
| | 187 |
| | 32 |
| | 33 |
| | 32 |
|
Expected return on plan assets(a) | (156 | ) | | (158 | ) | | (215 | ) | | — |
| | — |
| | — |
|
| Recognized net actuarial loss | 57 |
| | 52 |
| | 75 |
| | 1 |
| | — |
| | — |
|
| Settlements | 7 |
| | 1 |
| | 1,357 |
| | — |
| | — |
| | — |
|
| Other | (9 | ) | | (9 | ) | | (10 | ) | | (2 | ) | | (1 | ) | | (1 | ) |
| Net periodic benefit cost | $ | 69 |
| | $ | 76 |
| | $ | 1,432 |
| | $ | 43 |
| | $ | 43 |
| | $ | 43 |
|
| |
(a) | The expected return on plan assets is determined by multiplying the fair value of plan assets at the remeasurement date, typically the prior year-end adjusted for estimated current year cash benefit payments and contributions, by the expected long-term rate of return. |
The components of net periodic benefit cost other than the service cost component are included in the line item Nonoperating expense in our consolidated income statement.
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Benefits |
| Projected 2023 | | 2022 | | 2021 | | 2020 | | 2022 | | 2021 | | 2020 |
| Discount rate | 5.18 | % | | 2.71 | % | | 1.98 | % | | 2.44 | % | | 3.15 | % | | 2.69 | % | | 3.51 | % |
| Expected long-term return on plan assets | 5.74 | % | | 3.80 | % | | 3.41 | % | | 3.66 | % | | — | | | — | | | — | |
| Rate of compensation increase | 3.49 | % | | 3.23 | % | | 3.07 | % | | 3.08 | % | | — | | | — | | | — | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| | Projected 2018 | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Discount rate | 3.10 | % | | 3.19 | % | | 3.91 | % | | 3.86 | % | | 4.29 | % | | 4.59 | % | | 4.28 | % |
| Expected long-term return on plan assets | 4.54 | % | | 4.46 | % | | 4.84 | % | | 5.21 | % | | — |
| | — |
| | — |
|
| Rate of compensation increase | 2.27 | % | | 2.29 | % | | 2.32 | % | | 2.63 | % | | — |
| | — |
| | — |
|
|
| | |
| 39 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Other Benefits |
| 2022 | | 2021 | | 2022 | | 2021 |
| Discount rate | 5.18 | % | | 2.36 | % | | 5.92 | % | | 3.15 | % |
| Rate of compensation increase | 3.49 | % | | 3.23 | % | | — | | | — | |
| | | | | | | | |
| 47 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
|
| | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Discount rate | 3.10 | % | | 3.19 | % | | 3.91 | % | | 4.29 | % |
| Rate of compensation increase | 2.27 | % | | 2.29 | % | | — |
| | — |
|
Investment Strategies for the Principal Plans
Strategic asset allocation decisions are made considering several risk factors, including plan participants' retirement benefit security, the estimated payments of the associated liabilities, the plan funded status, and Kimberly-Clark's financial condition. The resulting strategic asset allocation is a diversified blend of equity and fixed income investments. Equity investments are typically diversified across geographies and market capitalization. Fixed income investments are diversified across multiple sectors including government issues and corporate debt instruments with a portfolio duration that is consistent with the estimated payment of the associated liability. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. Our 20182023 target plan asset allocation for the Principal Plans is 70approximately 85 percent fixed income securities and 3015 percent equity securities.
The expected long-term rate of return is generally evaluated on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was 4.723.55 percent in 2017, 5.102022, 3.51 percent in 20162021 and 5.353.76 percent in 2015,2020, and will be 4.816.05 percent in 2018.
|
| | |
| 40 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
2023.
Set forth below are the pension plan assets of the Principal Plans measured at fair value, by level in the fair-value hierarchy. More than 7065 percent of the assets are held in pooled funds and are measured using a net asset value (or its equivalent). Accordingly, such assets do not meet the Level 1, Level 2, or Level 3 criteria of the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at December 31, 2022 |
| Total
Plan Assets | | Assets at Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | | Assets at Significant
Observable
Inputs
(Level 2) | | Assets at Significant
Unobservable
Inputs
(Level 3) |
| Cash and Cash Equivalents | | | | | | | |
| Held directly | $ | 69 | | | $ | 69 | | | $ | — | | | $ | — | |
| Held through mutual and pooled funds measured at net asset value | 76 | | | — | | | — | | | — | |
| Fixed Income | | | | | | | |
| Held directly | | | | | | | |
| U.S. government and municipals | 115 | | | 115 | | | — | | | — | |
| U.S. corporate debt | 193 | | | — | | | 193 | | | — | |
| International bonds | 33 | | | — | | | 33 | | | — | |
| Held through mutual and pooled funds measured at net asset value | | | | | | | |
| U.S. government and municipals | 71 | | | — | | | — | | | — | |
| U.S. corporate debt | 419 | | | — | | | — | | | — | |
| International bonds | 549 | | | — | | | — | | | — | |
| Equity | | | | | | | |
| Held directly | | | | | | | |
| U.S. equity | 21 | | | 21 | | | — | | | — | |
| International equity | 15 | | | 15 | | | — | | | — | |
| Held through mutual and pooled funds measured at net asset value | | | | | | | |
| Non-U.S. equity | 15 | | | — | | | — | | | — | |
| Global equity | 221 | | | — | | | — | | | — | |
| Insurance Contracts | 222 | | | — | | | — | | | 222 | |
| Other | (1) | | | (1) | | | — | | | — | |
| Total Plan Assets | $ | 2,018 | | | $ | 219 | | | $ | 226 | | | $ | 222 | |
|
| | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2017(a) |
| | Total Plan Assets | | Assets at Quoted Prices in Active Markets for Identical Assets (Level 1) | | Assets at Significant Unobservable Inputs (Level 3) |
| Cash and Cash Equivalents | | | | | |
| Held directly | $ | 28 |
| | $ | 28 |
| | $ | — |
|
| Held through mutual and pooled funds measured at net asset value | 24 |
| | — |
| | — |
|
| Fixed Income | | | | | |
| Held directly | | | | | |
| U.S. government and municipals | 522 |
| | 522 |
| | — |
|
| Held through mutual and pooled funds measured at net asset value | | | | | |
| U.S. government and municipals | 150 |
| | — |
| | — |
|
| U.S. corporate debt | 686 |
| | — |
| | — |
|
| International bonds | 665 |
| | — |
| | — |
|
| Equity | | | | | |
| Held directly | | | | | |
| U.S. equity | 41 |
| | 41 |
| | — |
|
| International equity | 47 |
| | 47 |
| | — |
|
| Held through mutual and pooled funds measured at net asset value | | | | | |
| Non-U.S. equity | 85 |
| | — |
| | — |
|
| Global equity | 730 |
| | — |
| | — |
|
| Insurance Contracts | 334 |
| | — |
| | 334 |
|
| Total Plan Assets | $ | 3,312 |
| | $ | 638 |
| | $ | 334 |
|
| |
(a) | There were no plan assets measured at Level 2. |
For the U.S. pension plan, Treasury futuresFutures contracts are used when appropriate to manage duration targets. As of December 31, 20172022 and 2016,2021, the U.S. plan hadheld directly Treasury futures contracts in place with a total notional value of approximately $138$362 and $216,$377, respectively, and an
| | | | | | | | |
| 48 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
insignificant fair value. As of December 31, 2022 and 2021, the United Kingdom plan held through a pooled fund future contracts with a total notional value of approximately $524 and $403, and an insignificant fair value.
During 20172022 and 2016,2021, the plan assets did not include a significant amount of Kimberly-Clark common stock.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at December 31, 2021 |
| Total
Plan Assets | | Assets at Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | |
Assets at Significant
Observable
Inputs
(Level 2) | | Assets at Significant
Unobservable
Inputs
(Level 3) |
| Cash and Cash Equivalents | | | | | | | |
| Held directly | $ | 50 | | | $ | 50 | | | $ | — | | | $ | — | |
| Held through mutual and pooled funds measured at net asset value | 26 | | | — | | | — | | | — | |
| Fixed Income | | | | | | | |
| Held directly | | | | | | | |
| U.S. government and municipals | 166 | | | 158 | | | 8 | | | — | |
| U.S. corporate debt | 293 | | | 7 | | | 286 | | | — | |
| International bonds | 43 | | | — | | | 43 | | | — | |
| Held through mutual and pooled funds measured at net asset value | | | | | | | |
| U.S. government and municipals | 149 | | | — | | | — | | | — | |
| U.S. corporate debt | 646 | | | — | | | — | | | — | |
| International bonds | 1,144 | | | — | | | — | | | — | |
| Equity | | | | | | | |
| Held directly | | | | | | | |
| U.S. equity | 17 | | | 17 | | | — | | | — | |
| International equity | 32 | | | 32 | | | — | | | — | |
| Held through mutual and pooled funds measured at net asset value | | | | | | | |
| Non-U.S. equity | 46 | | | — | | | — | | | — | |
| Global equity | 423 | | | — | | | — | | | — | |
| Insurance Contracts | 355 | | | — | | | — | | | 355 | |
| Other | (1) | | | 1 | | | — | | | — | |
| Total Plan Assets | $ | 3,389 | | | $ | 265 | | | $ | 337 | | | $ | 355 | |
|
| | |
| 41 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
|
| | | | | | | |
| | Fair Value Measurements at December 31, 2016(a) |
| | Total Plan Assets | | Assets at Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Cash and Cash Equivalents | | | |
| Held directly | $ | 33 |
| | $ | 33 |
|
| Held through mutual and pooled funds measured at net asset value | 17 |
| | — |
|
| Fixed Income | | | |
| Held directly | | | |
| U.S. government and municipals | 122 |
| | 122 |
|
| Held through mutual and pooled funds measured at net asset value | | | |
| U.S. government and municipals | 128 |
| | — |
|
| U.S. corporate debt | 648 |
| | — |
|
| International bonds | 1,223 |
| | — |
|
| Equity | | | |
| Held directly | | | |
| U.S. equity | 41 |
| | 41 |
|
| International equity | 44 |
| | 44 |
|
| Held through mutual and pooled funds measured at net asset value | | | |
| Non-U.S. equity | 68 |
| | — |
|
| Global equity | 687 |
| | — |
|
| Total Plan Assets | $ | 3,011 |
| | $ | 240 |
|
| |
(a) | There were no plan assets measured at Level 2 or Level 3. |
Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. Substantially all of the equity securities held directly by the plans are actively traded and fair values are determined based on quoted market prices. Fair values of U.S. Treasurygovernment securities are determined based on trading activity in the marketplace.
Fair values of U.S. corporate debt, U.S. securitized fixed incomemunicipals and international bonds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations.
Fair values of equity securities and fixed income securities held through units of pooled funds are based on net asset value of the units of the pooled fund determined by the fund manager. Pooled funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors. The fair value of pooled funds is determined by the value of the underlying assets held by the fund and the units outstanding.
Equity securities held directly by the pension trusts and those held through units in pooled funds are monitored as to issuer and industry. Except for U.S. Treasuries, concentrations of fixed income securities are similarly monitored for concentrations by issuer and industry. As of December 31, 2017,2022, there were no significant concentrations of equity or debt securities in any single issuer or industry.
| | | | | | | | |
| 49 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
No level 3 transfers (in or out) were made in 20172022 or 2016, other than an insurance contract purchase in 2017.2021. Fair values of insurance contracts are based on an evaluation of various factors, including purchase price.
|
| | |
| 42 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
We expect to contribute up to $100approximately $25 to our defined benefit pension plans in 2018.2023. Over the next ten years, we expect that the following gross benefit payments will occur:
|
| | | | | | | |
| | Pension Benefits | | Other Benefits |
| 2018 | $ | 245 |
| | $ | 58 |
|
| 2019 | 259 |
| | 60 |
|
| 2020 | 263 |
| | 60 |
|
| 2021 | 261 |
| | 62 |
|
| 2022 | 272 |
| | 63 |
|
| 2023-2027 | 1,322 |
| | 299 |
|
| | | | | | | | | | | |
| Pension Benefits | | Other Benefits |
| 2023 | $ | 179 | | | $ | 57 | |
| 2024 | 190 | | | 58 | |
| 2025 | 188 | | | 57 | |
| 2026 | 189 | | | 56 | |
| 2027 | 192 | | | 53 | |
| 2028-2032 | 929 | | | 233 | |
Defined Contribution Pension Plans
Our 401(k) profit sharing plan and supplemental plan provide for a matching contribution of a U.S. employee's contributions and accruals, subject to predetermined limits, as well as a discretionary profit sharing contribution, in which contributions will be based on our profit performance. We also have defined contribution pension plans for certain employees outside the U.S. Costs charged to expense for our defined contribution pension plans were $128$132 in 2017, $1262022, $116 in 2016,2021, and $107$141 in 2015.2020. Approximately one-fourth30 percent of these costs were for plans outside the U.S.
Note 7.9. Stockholders' Equity
The changes in the components of accumulated other comprehensive income ("AOCI")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 |
| | | Unrealized Translation | | Defined Benefit Pension Plans | | Other Postretirement Benefit Plans | | Cash Flow Hedges and Other | |
| Balance as of December 31, 2015 | | $ | (2,252 | ) | | $ | (1,013 | ) | | $ | (3 | ) | | $ | (10 | ) | |
| Balance as of December 31, 2020 | | Balance as of December 31, 2020 | | $ | (2,157) | | | $ | (912) | | | $ | (40) | | | $ | (63) | |
| Other comprehensive income (loss) before reclassifications | | (99 | ) | | (115 | ) | | (27 | ) | | 33 |
| Other comprehensive income (loss) before reclassifications | | (265) | | | 37 | | | 9 | | | 53 | |
| (Income) loss reclassified from AOCI | | — |
| | 31 |
| (a) | (1 | ) | (a) | (18 | ) | (Income) loss reclassified from AOCI | | — | | | 72 | | (a) | (3) | | (a) | 30 | |
| Net current period other comprehensive income (loss) | | (99 | ) | | (84 | ) | | (28 | ) | | 15 |
| Net current period other comprehensive income (loss) | | (265) | | | 109 | | | 6 | | | 83 | |
| Balance as of December 31, 2016 | | (2,351 | ) | | (1,097 | ) | | (31 | ) | | 5 |
| |
| | Balance as of December 31, 2021 | | Balance as of December 31, 2021 | | (2,422) | | | (803) | | | (34) | | | 20 | |
| Other comprehensive income (loss) before reclassifications | | 487 |
| | 85 |
| | (7 | ) | | (56 | ) | Other comprehensive income (loss) before reclassifications | | (347) | | | (51) | | | 86 | | | (139) | |
| (Income) loss reclassified from AOCI | | — |
| | 36 |
| (a) | (1 | ) | (a) | 11 |
| (Income) loss reclassified from AOCI | | — | | | 65 | | (a) | — | | (a) | (44) | |
| Net current period other comprehensive income (loss) | | 487 |
| | 121 |
| | (8 | ) | | (45 | ) | Net current period other comprehensive income (loss) | | (347) | | | 14 | | | 86 | | | (183) | |
| Balance as of December 31, 2017 | | $ | (1,864 | ) | | $ | (976 | ) | | $ | (39 | ) | | $ | (40 | ) | |
| Balance as of December 31, 2022 | | Balance as of December 31, 2022 | | $ | (2,769) | | | $ | (789) | | | $ | 52 | | | $ | (163) | |
| |
(a) | Included in computation of net periodic pension and other postretirement benefits costs (see Note 6)(a) Included in computation of net periodic pension and other postretirement benefits costs (see Note 8). |
Included in the above defined benefit pension plans and other postretirement benefit plans balances as of December 31, 20172022 is $1,050$735 and $35$2 of unrecognized net actuarial loss and unrecognized net prior service credit, respectively, of which $50 and $10 pre-tax, respectively, are expected to be recognized as a component of net periodic benefit cost in 2018.
respectively.
|
| | | | | | | |
| 4350 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
The changes in the components of AOCI attributable to Kimberly-Clark, including the tax effect, are as follows:
| | | | Year Ended December 31 | | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 | | 2022 | | 2021 | | 2020 |
| Unrealized translation | $ | 398 |
| | $ | (88 | ) | | $ | (882 | ) | Unrealized translation | $ | (324) | | | $ | (248) | | | $ | 98 | |
| Tax effect | 89 |
| | (11 | ) | | (23 | ) | Tax effect | (23) | | | (17) | | | 16 | |
| | 487 |
| | (99 | ) | | (905 | ) | | (347) | | | (265) | | | 114 | |
| | | | | | | | | | | | |
| Defined benefit pension plans | | | | | | Defined benefit pension plans | |
| Unrecognized net actuarial loss and transition amount | | | | | | Unrecognized net actuarial loss and transition amount | |
| Funded status recognition | 159 |
| | (230 | ) | | (4 | ) | Funded status recognition | (109) | | | 16 | | | 24 | |
| Amortization included in net periodic benefit cost | 63 |
| | 52 |
| | 75 |
| |
| 2015 U.S. plan settlements (recorded in Other (income) and expense, net) | — |
| | — |
| | 1,355 |
| |
| Amortization | | Amortization | 34 | | | 37 | | | 41 | |
| Settlements and curtailments | | Settlements and curtailments | 52 | | | 91 | | | 49 | |
| Currency and other | (66 | ) | | 81 |
| | 42 |
| Currency and other | 36 | | | 10 | | | (26) | |
| | 156 |
| | (97 | ) | | 1,468 |
| | 13 | | | 154 | | | 88 | |
| Unrecognized prior service cost/credit | | | | | | Unrecognized prior service cost/credit | | | | | |
| Funded status recognition | 2 |
| | (1 | ) | | 4 |
| Funded status recognition | 2 | | | (2) | | | 2 | |
| Amortization included in net periodic benefit cost | (8 | ) | | (8 | ) | | (12 | ) | |
| Amortization | | Amortization | — | | | (4) | | | (4) | |
| Curtailments | | Curtailments | — | | | (3) | | | — | |
| Currency and other | 3 |
| | (6 | ) | | (2 | ) | Currency and other | — | | | — | | | 1 | |
| | (3 | ) | | (15 | ) | | (10 | ) | | 2 | | | (9) | | | (1) | |
| Tax effect | (32 | ) | | 28 |
| | (547 | ) | Tax effect | (1) | | | (36) | | | (20) | |
| | 121 |
| | (84 | ) | | 911 |
| | 14 | | | 109 | | | 67 | |
| Other postretirement benefit plans | | | | | | Other postretirement benefit plans | | | | | |
| Unrecognized net actuarial loss and transition amount and other | (11 | ) | | (45 | ) | | 55 |
| Unrecognized net actuarial loss and transition amount and other | 113 | | | 12 | | | (35) | |
| Tax effect | 3 |
| | 17 |
| | (21 | ) | Tax effect | (27) | | | (6) | | | 8 | |
| | (8 | ) | | (28 | ) | | 34 |
| | 86 | | | 6 | | | (27) | |
| Cash flow hedges and other | | | | | | Cash flow hedges and other | | | | | |
| Recognition of effective portion of hedges | (76 | ) | | 44 |
| | 66 |
| Recognition of effective portion of hedges | (165) | | | 70 | | | (32) | |
| Amortization included in net income | 18 |
| | (20 | ) | | (53 | ) | |
| Amortization | | Amortization | (58) | | | 39 | | | (2) | |
| Currency and other | (2 | ) | | (4 | ) | | (7 | ) | Currency and other | (22) | | | (4) | | | (5) | |
| Tax effect | 15 |
| | (5 | ) | | (1 | ) | Tax effect | 62 | | | (22) | | | 7 | |
| | (45 | ) | | 15 |
| | 5 |
| | (183) | | | 83 | | | (32) | |
| | | | | | | | | | | | |
| Other | — |
| | — |
| | (11 | ) | |
| | Change in AOCI | $ | 555 |
| | $ | (196 | ) | | $ | 34 |
| Change in AOCI | $ | (430) | | | $ | (67) | | | $ | 122 | |
|
Amounts are reclassified from AOCI into costCost of products sold, marketing, research and general expenses, interestNonoperating expense, Interest expense, or otherOther (income) and expense, net, as applicable, in the consolidated income statement.
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 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 adjustment would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation. The change in unrealized translation in 20172022 is primarily due to the strengtheningweakening of mostvarious foreign currencies versus the U.S. dollar, includingparticularly the euro, South Korean won,Indonesian rupiah and the British pound sterling, and Australian dollar.pound. 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.
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| 4451 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
During 2015, we acquired the remaining 49.9 percent interest in our subsidiary in Israel, Hogla-Kimberly, Ltd., for $151. As our subsidiary in Turkey was wholly-owned by our subsidiary in Israel, through this acquisition we also effectively acquired the remaining 49.9 percent interest in our subsidiary in Turkey, Kimberly-Clark Tuketim Mallari Sanayi ve Ticaret A.s.
Note 8.10. Leases and Commitments
We have entered into operating leases for certain facilities, automobilesvehicles, material handling and other equipment. The future minimum obligations under operatingOur leases having a noncancelable term in excesshave remaining contractual terms up to 96 years, some of one yearwhich include options to extend the leases for up to 99 years, and some of which include options to terminate the leases within 1 year. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Our lease costs are as follows:primarily related to facility leases for inventory warehousing and administration offices.
Lease Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31 | | |
| | 2022 | | | | 2021 | | 2020 | | Income Statement Classification |
| Operating lease expense | | $ | 145 | | | | | $ | 157 | | | $ | 168 | | | Cost of products sold, Marketing, research and general expenses |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Finance lease expense: | | | | | | | | | | |
| Amortization of lease assets | | 15 | | | | | 13 | | | 9 | | | Cost of products sold |
| Interest on lease liabilities | | 1 | | | | | 2 | | | 1 | | | Interest expense |
| Total finance lease expense | | 16 | | | | | 15 | | | 10 | | | |
| | | | | | | | | | |
Variable lease expense(a) | | 242 | | | | | 219 | | | 202 | | | Cost of products sold, Marketing, research and general expenses |
| Total lease expense | | $ | 403 | | | | | $ | 391 | | | $ | 380 | | | |
(a) Includes short-term leases, which are immaterial.
Lease Assets and Liabilities
| | | | | | | | | | | | | | | | | | | | |
| | December 31 | | |
| | 2022 | | 2021 | | Balance Sheet Classification |
| Assets | | | | | | |
| Operating lease | | $ | 475 | | | $ | 488 | | | Other Assets |
| Finance lease | | 71 | | | 86 | | | Property, Plant and Equipment, Net |
| Total lease assets | | $ | 546 | | | $ | 574 | | | |
| Liabilities | | | | | | |
| Current: | | | | | | |
| Operating lease | | $ | 127 | | | $ | 130 | | | Accrued expenses and other current liabilities |
| Finance lease | | 11 | | | 11 | | | Debt payable within one year |
| Noncurrent: | | | | | | |
| Operating lease | | 377 | | | 393 | | | Other Liabilities |
| Finance lease | | 49 | | | 60 | | | Long-Term Debt |
| Total lease liabilities | | $ | 564 | | | $ | 594 | | | |
As of December 31, 2022 and 2021, accumulated amortization of finance lease assets was $32 and $27, respectively.
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| 52 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
|
| | | |
| | Year Ending December 31 |
| 2018 | $ | 170 |
|
| 2019 | 130 |
|
| 2020 | 99 |
|
| 2021 | 65 |
|
| 2022 | 48 |
|
| Thereafter | 98 |
|
| Future minimum obligations | $ | 610 |
|
Consolidated rental expense under | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | | | |
| | Operating Leases | | Finance Leases | | Total | | | | |
| 2023 | | $ | 138 | | | $ | 13 | | | $ | 151 | | | | | |
| 2024 | | 119 | | | 10 | | | 129 | | | | | |
| 2025 | | 100 | | | 8 | | | 108 | | | | | |
| 2026 | | 83 | | | 6 | | | 89 | | | | | |
| 2027 | | 53 | | | 5 | | | 58 | | | | | |
| | | | | | | | | | |
| Thereafter | | 46 | | | 27 | | | 73 | | | | | |
| Total lease payments | | 539 | | | 69 | | | 608 | | | | | |
| Less imputed interest | | 35 | | | 9 | | | 44 | | | | | |
| Present value of lease liabilities | | $ | 504 | | | $ | 60 | | | $ | 564 | | | | | |
As of December 31, 2022, our operating leases was $281, $271have a weighted-average remaining lease term of 5 years and $279 in 2017, 2016a weighted-average discount rate of 3 percent and 2015, respectively.our finance leases have a weighted-average remaining lease term of 8 years and a weighted-average discount rate of 3 percent.
Supplemental Information Related to Leases
| | | | | | | | | | | | | | | | | | | | |
| | December 31 |
| | 2022 | | 2021 | | 2020 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
| Operating leases | | $ | 148 | | | $ | 155 | | | $ | 164 | |
| Finance leases | | 11 | | | 13 | | | 14 | |
| Lease assets obtained in exchange for new lease obligations: | | | | | | |
| Operating leases | | 57 | | | 34 | | | 198 | |
| Finance leases | | 6 | | | 56 | | | 20 | |
| Other non-cash modifications to lease assets: | | | | | | |
| Operating leases | | 72 | | | 61 | | | 98 | |
| | | | | | |
We have entered into long-term contracts for the purchase of superabsorbent materials, pulp and certain utilities. Commitments under these contracts based on current prices are $699$1,794 in 2018, $2062023, $958 in 2019, $2042024, $798 in 2020, $82025, $279 in 2021, $52026, $252 in 2022,2027, and $51$39 beyond the year 2022.2027.
Although we are primarily liable for payments on the above-mentioned leases and purchase commitments, our exposure to losses, if any, under these arrangements is not material.
Note 9. 11. Legal Matters
We routinely are subject to variousinvolved in legal proceedings, claims, disputes, tax matters, regulatory matters and governmental inquiries, inspections audits or investigations pertainingarising in the ordinary course of or incidental to issuesour business, including those noted below in this section. We record accruals in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such as contract disputes, product liability, tax matters, patentsan estimate is not possible or is immaterial, and trademarks, advertising, pricing, business practices, governmental regulations, employment and other matters. Althoughwe may be unable to estimate the resultspossible loss or range of litigation and claims cannot be predicted with certainty,losses that could potentially result from the application of non-monetary remedies, unless disclosed below. At present we believe that the ultimate dispositionoutcome of these matters, to the extent not previously provided for, will not have a material adverse effect,proceedings, individually orand in the aggregate, onwill not materially harm our business, financial condition,position, results of operations or liquidity.cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular
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| 53 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations or financial position.
We are party to certain legal proceedings relating to our former health care business, Avanos Medical, Inc. ("Avanos", previously Halyard Health, Inc.), which we spun-off on October 31, 2014, including a qui tam matter and certain subpoena and document requests from the federal government. The subpoena and document requests include subpoenas from the United States Department of Justice (DOJ) concerning allegations of potential criminal and civil violations of federal laws, including the Food, Drug, and Cosmetic Act, in connection with the manufacturing, marketing and sale of surgical gowns by our former health care business. We continue to cooperate in this investigation and are making efforts to explore a potential resolution with the DOJ.
We are subject to federal, state and local environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. We have been named a potentially responsible party under the provisions of the U.S. federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statutes, at a number of sites where hazardous substances are present. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, liquidity, financial condition or results of operations.
Note 10.12. 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, 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. We enter into
At December 31, 2022 and 2021, derivative instruments to hedge a portionassets were $99 and $65, respectively, and derivative liabilities were $318 and $41, respectively, primarily comprised 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 and qualify as cash flow hedges. The foreign currency exposure on certain non-functional currency denominated monetaryexchange and commodity price contracts. Derivative assets are recorded in Other current assets or Other Assets, as appropriate, and derivative liabilities primarily intercompany loansare recorded in Accrued expenses and accounts payable, is hedged with primarily undesignated derivative instruments.other current liabilities or Other Liabilities, as appropriate.
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
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| 45 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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and qualify as fair value hedges. From time to time, we also hedge the anticipated issuance of fixed-rate debt and those contracts are designated as cash flow hedges.
We use derivative instruments, such as forward swap 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.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 financial instruments. These instrumentscross-currency swap contracts and certain foreign denominated debt which are designated as net investment hedgeshedges. The foreign currency exposure on certain non-functional currency denominated monetary assets and have an aggregate notional valueliabilities, primarily intercompany loans and accounts payable, is hedged with primarily undesignated derivative instruments.
Derivative instruments are entered into to hedge a portion of $870 at December 31, 2017. Changesforecasted 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 net investmentfixed-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 portion of our exposure to market risk arising from changes in prices of certain commodities. These derivatives are designated as cash flow hedges are recorded in AOCI as partof specific quantities of the cumulative translation adjustment.underlying commodity expected to be purchased in future months. In addition, we utilize negotiated contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs.
At December 31, 2017 and 2016, derivative assets were $27 and $43, respectively, and derivative liabilities were $51 and $46, respectively, primarily comprised of foreign currency exchange contracts.
The derivative assets are included in the consolidated balance sheet in other current assets and other assets, as appropriate. The derivative liabilities are included in the consolidated balance sheet in accrued expenses and other liabilities, as appropriate. | | | | | | | | |
| 54 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
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 derivative instruments are recorded as an asset or liability, as appropriate, with the offset recorded in current earnings.Interest expense. The offset to the change in fair values of the related hedged itemsdebt is also is recorded in current earnings.Interest expense. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to interestInterest expense over the life of the related debt. AtAs of December 31, 2017,2022, the aggregate notional values and carrying values of debt subject to outstanding interest rate contracts designated as fair value hedges were $300. Fair value hedges resulted in no significant ineffectiveness in each of the three years ended December 31, 2017,$525 and gains or losses recognized in interest expense were not significant.$470, respectively. For each of the three years ended December 31, 2017, no gain2022, gains or loss waslosses recognized in earnings as a result of a hedged firm commitment no longer qualifying as a fair value hedge.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 effective portion of 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 December 31, 2017,2022, outstanding commodity forward contracts were in place to hedge a limited portion of our estimated requirements of the related underlying commodities in 20182023 and future periods. As of December 31, 2017,2022, the aggregate notional valuesvalue of outstanding foreign exchange and interest rate derivative contracts designated as cash flow hedges were $795 and $200, respectively. Cash flow hedges resulted in no significant ineffectiveness inwas $2.5 billion. For each of the three years ended December 31, 2017, and2022, no significant gains or losses were reclassified into earningsInterest 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 forecastforecasted transaction no longer being probable of occurring. At December 31, 2017,2022, amounts to be reclassified from AOCI into Interest expense, Cost of products sold or Other (income), net during the next twelve months are not expected to be material. The maximum maturity of cash flow hedges in place at December 31, 20172022 is January 2020.December 2025.
Net Investment Hedges
For derivative instruments that are designated and qualify as net investment hedges, the aggregate notional value was $1.3 billion at December 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 year ended December 31, 2022, unrealized gain of $72 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 December 31, 2022.
Undesignated Hedging Instruments
Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in otherOther (income) and expense, net. A loss of $29, a loss of $5 and a gain of $37 and losses of $30 and $188$39 were recorded in the years ending December 31, 2017, 20162022, 2021 and 2015,2020, respectively. 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 December 31, 2017,2022, the notional amount of these undesignated derivative instruments was approximately $2.4$2.2 billion.
Note 11. Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code which impacted 2017 including, but not limited to, reducing the U.S. federal corporate tax rate and requiring a one-time transition tax on certain undistributed earnings of foreign subsidiaries.
The Tax Act also puts in place new tax laws that will apply prospectively, which include, but are not limited to, (1) implementing a base erosion and anti-abuse tax, (2) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries, (3) a new provision designed to tax currently in the U.S. global intangible low-taxed income ("GILTI") of foreign subsidiaries, which
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| 4655 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
allows for the possibility of utilizing foreign tax credits to offset the income tax liability (subject to some limitations), and (4) a lower effective U.S. tax rate on certain revenues from sources outside the U.S.
GAAP requires the impact of tax legislation to be recorded in the period of enactment. Therefore, in connection with our initial analysis of the impact of the Tax Act, we recorded a discrete net tax expense of $76 in the period ended December 31, 2017. This amount consists of a net expense of $278 for the transition tax and a net benefit of $202 for the remeasurement of deferred taxes associated with the corporate rate reduction and our reassessment of permanently reinvested earnings. In addition, we recorded a net benefit of $152 for certain tax planning actions that were taken in the fourth quarter of 2017 in anticipation of the enactment of the Tax Act.
Other than the item noted below, we were able to make reasonable estimates of the impact of the Tax Act and have recorded provisional amounts for the transition tax, the remeasurement of deferred taxes, and our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances. These estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, state tax conformity to federal tax changes and the impact of prospective tax related to the GILTI provisions.
At December 31, 2017, we were not able to reasonably estimate and, therefore, have not recorded deferred taxes for the GILTI provisions. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future years, or in the period in which that tax was incurred.Note 13. Income Taxes
An analysis of the provisionProvision for income taxes follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| Current income taxes | | | | | |
| United States | $ | 248 | | | $ | 179 | | | $ | 252 | |
| State | 16 | | | 35 | | | 81 | |
| Other countries | 288 | | | 335 | | | 298 | |
| Total | 552 | | | 549 | | | 631 | |
| Deferred income taxes | | | | | |
| United States | (27) | | | (18) | | | 62 | |
| State | (1) | | | (1) | | | 5 | |
| Other countries | (29) | | | (51) | | | (22) | |
| Total | (57) | | | (70) | | | 45 | |
| Total provision for income taxes | $ | 495 | | | $ | 479 | | | $ | 676 | |
|
| | | | | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
| Current income taxes | | | | | |
| United States | $ | 463 |
| | $ | 523 |
| | $ | 223 |
|
| State | 52 |
| | 53 |
| | 56 |
|
| Other countries | 330 |
| | 361 |
| | 394 |
|
| Total | 845 |
| | 937 |
| | 673 |
|
| Deferred income taxes | | | | | |
| United States | (68 | ) | | (40 | ) | | (180 | ) |
| State | (3 | ) | | 31 |
| | (74 | ) |
| Other countries | 2 |
| | (6 | ) | | (1 | ) |
| Total | (69 | ) | | (15 | ) | | (255 | ) |
| Total provision for income taxes | $ | 776 |
| | $ | 922 |
| | $ | 418 |
|
Income before income taxes is earned in the following tax jurisdictions: | | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| United States | $ | 1,802 | | | $ | 1,580 | | | $ | 2,336 | |
| Other countries | 538 | | | 645 | | | 594 | |
| Total income before income taxes and equity interests | $ | 2,340 | | | $ | 2,225 | | | $ | 2,930 | |
|
| | | | | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
| United States | $ | 1,995 |
| | $ | 2,088 |
| | $ | 451 |
|
| Other countries | 996 |
| | 921 |
| | 884 |
|
| Total income before income taxes | $ | 2,991 |
| | $ | 3,009 |
| | $ | 1,335 |
|
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| 4756 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
Deferred income tax assets and liabilities are composedcomprised of the following:
| | | | | | | | | | | | | | |
| December 31 |
| 2022 | | 2021 |
| Deferred tax assets | | | |
| Pension and other postretirement benefits | $ | 179 | | | $ | 215 | |
| Tax credits and loss carryforwards | 534 | | | 531 | |
Capitalized research costs(a) | 118 | | | — | |
| Lease liability | 116 | | | 116 | |
| Prepaid royalties | 56 | | | 117 | |
| Derivatives | 74 | | | 38 | |
| Other | 353 | | | 317 | |
| 1,430 | | | 1,334 | |
| Valuation allowances | (299) | | | (279) | |
| Total deferred tax assets | 1,131 | | | 1,055 | |
| | | |
| Deferred tax liabilities | | | |
| Property, plant and equipment, net | 940 | | | 921 | |
| Investments in subsidiaries | 101 | | | 105 | |
| Intangible assets | 153 | | | 156 | |
| Lease asset | 111 | | | 114 | |
| Other | 229 | | | 228 | |
| Total deferred tax liabilities | 1,534 | | | 1,524 | |
| Net deferred tax assets (liabilities) | $ | (403) | | | $ | (469) | |
|
| | | | | | | | |
| | December 31 |
| | 2017 | | 2016 |
| Deferred tax assets | | | |
| Pension and other postretirement benefits | $ | 312 |
| | $ | 499 |
|
| Tax credits and loss carryforwards | 470 |
| | 450 |
|
| Derivatives and unrealized exchange gains and losses | 63 |
| | 32 |
|
| Share based compensation | 47 |
| | 86 |
|
| Other | 308 |
| | 480 |
|
| | 1,200 |
| | 1,547 |
|
| Valuation allowances | (176 | ) | | (225 | ) |
| Total deferred tax assets | 1,024 |
| | 1,322 |
|
| | | | |
| Deferred tax liabilities | | | |
| Property, plant and equipment, net | 818 |
| | 1,079 |
|
| Investments in subsidiaries | 117 |
| | 190 |
|
| Goodwill | 83 |
| | 83 |
|
| Other | 186 |
| | 268 |
|
| Total deferred tax liabilities | 1,204 |
| | 1,620 |
|
| Net deferred tax assets (liabilities) | $ | (180 | ) | | $ | (298 | ) |
Valuation allowances at the end of 20172022 primarily relate to tax credits, capital loss carryforwards, and income tax loss carryforwards of $743. $1.2 billion. If these items are not utilized against taxable income, $481$534 of the income tax loss carryforwards will expire from 20182023 through 2037.2039. The remaining $262 have$687 has no expiration date.
Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to expiration of these carryforwards. Although realization is not assured, we believe it is more likely than not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased due to changes in the tax environment or if estimates of future taxable income change during the carryforward period.
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| 57 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Presented below is a reconciliation of the Provision for income tax provisiontaxes computed at the U.S. federal statutory tax rate to the actual effective tax rate:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| U.S. statutory rate applied to income before income taxes and equity interests | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State income taxes, net of federal tax benefit | 0.5 | | | 1.2 | | | 2.3 | |
| | | | | |
| | | | | |
| Routine tax incentives | (3.5) | | | (5.8) | | | (4.3) | |
| Net nondeductible expenses | 1.4 | | | 1.5 | | | 0.8 | |
| Net tax cost on foreign income | 2.4 | | | 2.4 | | | 2.7 | |
| Valuation allowance | 1.3 | | | 2.4 | | | 0.7 | |
Other - net(a) | (1.9) | | | (1.2) | | | (0.1) | |
| Effective income tax rate | 21.2 | % | | 21.5 | % | | 23.1 | % |
|
| | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
| U.S. statutory rate applied to income before income taxes | 35.0 | % | | 35.0 | % | | 35.0 | % |
| Rate of state income taxes, net of federal tax benefit | 1.1 |
| | 1.8 |
| | (0.9 | ) |
| Statutory rates other than U.S. statutory rate | (3.1 | ) | | (2.7 | ) | | (6.9 | ) |
| Venezuela deconsolidation, balance sheet remeasurement and inflationary impacts | — |
| | (0.1 | ) | | 4.5 |
|
Uncertain tax positions adjustment(a) | — |
| | — |
| | 3.7 |
|
| Routine tax incentives | (2.7 | ) | | (4.0 | ) | | (7.4 | ) |
| Net tax (benefit) cost on foreign income | (0.7 | ) | | 0.1 |
| | 5.1 |
|
| Net impact of the Tax Act | (2.5 | ) | | — |
| | — |
|
Other - net(b) | (1.2 | ) | | 0.5 |
| | (1.8 | ) |
| Effective income tax rate | 25.9 | % | | 30.6 | % | | 31.3 | % |
| |
(a) | In 2015, we updated our assessment of uncertain tax positions for certain international operations and as a result we recorded an immaterial income tax charge of $49 related to prior years. |
| |
(b) | Other - net is composed of numerous items, none of which is greater than 1.75 percent of income before income taxes. |
Prior to the Tax Act,As of December 31, 2022, we considered essentially all historicalhave accumulated undistributed earnings in our non-U.S. subsidiaries to be indefinitely reinvested, except related to certain equity investments, and, accordingly, recorded insignificant deferred income taxes. Prior to the transition
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| 48 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
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tax, we had an excess of the amount for financial reporting over the tax basis in our foreign subsidiaries. While the transition tax resulted in the reduction of the excess of the amount for financial reporting over the tax basis ingenerated by our foreign subsidiaries an actual repatriation from our non-U.S. subsidiaries could beof approximately $7.4 billion. Earnings of $3.7 billion were previously subject to U.S. federal income tax. Any additional taxes due with respect to such previously-taxed foreign earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes.
Deferred taxes have been recorded for foreign and U.S. state income taxes on $1.0$0.7 billion of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute $4.5the remaining $3.0 billion of previously-taxed foreign earnings of foreign consolidated subsidiaries taxed as part of the transition tax and therefore have not recorded any deferred taxes related to such amounts for foreign and U.S. state income taxes. taxes on such earnings.
We consider any excess of the amount for financial reporting over the tax basis of our investment in our foreign subsidiaries to be indefinitely reinvested. At this time, theThe determination of deferred tax liabilities on thisthe amount of financial reporting over tax basis or the $3.0 billion of previously-taxed foreign earnings is not practicable.
Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| Balance at January 1 | $ | 506 | | | $ | 497 | | | $ | 383 | |
| Gross increases for tax positions of prior years | 22 | | | 62 | | | 144 | |
| Gross decreases for tax positions of prior years | (38) | | | (37) | | | (34) | |
| Gross increases for tax positions of the current year | 36 | | | 42 | | | 36 | |
| Settlements | (21) | | | (39) | | | (22) | |
| Other | (17) | | | (19) | | | (10) | |
| Balance at December 31 | $ | 488 | | | $ | 506 | | | $ | 497 | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Balance at January 1 | $ | 321 |
| | $ | 406 |
| | $ | 416 |
|
| Gross increases for tax positions of prior years | 50 |
| | 20 |
| | 80 |
|
| Gross decreases for tax positions of prior years | (23 | ) | | (104 | ) | | (61 | ) |
| Gross increases for tax positions of the current year | 37 |
| | 39 |
| | 59 |
|
| Settlements | (19 | ) | | (29 | ) | | (63 | ) |
| Other | (12 | ) | | (11 | ) | | (25 | ) |
| Balance at December 31 | $ | 354 |
| | $ | 321 |
| | $ | 406 |
|
Of the amounts recorded as unrecognized income tax benefits at December 31, 2017, $2972022, $420 would reduce our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized income tax benefits in Provision for income tax expense.taxes. During each of the three years ended December 31, 2017,2022, the net impact inof interest and penalties was not significant. Total accrued penalties and net accrued interest was $35 and $47$24 at December 31, 20172022 and 2016,2021, respectively.
It is reasonably possible that a number of uncertainties could be resolved within the next 12 months. The aggregate resolution of the uncertainties could be up to $220, while$130, while none of the uncertainties is individually significant. Resolution of these matters is not expected to have a material effect on our financial condition, results of operations or liquidity.
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| 58 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
As of December 31, 2017,2022, the following tax years remain subject to examination for the major jurisdictions where we conduct business:
|
| |
Jurisdiction | Years |
United States | 2014 to 2017 |
United Kingdom | 2012 to 2017 |
Brazil | 2012 to 2017 |
South Korea | 2014 to 2017 |
China | 2008 to 2017 |
| | | | | | | | | | | |
| Jurisdiction | Years |
| United States | 2016 | to | 2022 |
| United Kingdom | 2020 | to | 2022 |
| Brazil | 2016 | to | 2022 |
| China | 2011 | to | 2022 |
| South Korea | 2020 | to | 2022 |
Our originally filed U.S. federal income tax returns have been audited through 2013. We have various2015; however, our amended U.S. federal income tax return positions in administrative appealsreturns are subject to audit for 2004, 2005, 2007 and 2010 through 2013.2013-2018.
State income tax returns are generally subject to examination for a period of 3 to 5 years after after filing of the respective return. The state effect of any changes to filed federal positions remains subject to examination by various states for a period of up to two years after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.
The Brazilian tax authority, Secretaria da Receita Federal do Brasil ("RFB"), concluded an audit for the taxable periods from 2008-2013. This audit included a review of our determinations of amortization of certain goodwill arising from prior acquisitions in Brazil, and the RFB has proposed adjustments that effectively eliminate the goodwill amortization benefits related to these transactions. Administrative appeals have been exhausted with a partial favorable decision for our position, and the remaining dispute is in the judicial phase. Based upon the matters that remain in dispute, the amount of the proposed tax adjustments and penalties is approximately $60 as of December 31, 2022 (translated at the December 31, 2022 currency exchange rate). The amount ultimately in dispute will be significantly greater because of interest. We believe we have meritorious defenses and intend to vigorously defend against these proposed adjustments; however, it is expected to take a number of years to reach resolution of this matter.
As part of the tax audit of our U.S. federal income tax returns for the taxable years ended December 31, 2017 and 2018, the U.S. Internal Revenue Service proposed an adjustment that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries owed by us. We believe we have adequate reserves and meritorious defenses and intend to vigorously defend against the proposed adjustment; however, it is expected to take a number of years to reach resolution of this matter.
|
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| 49 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
Note 12.14. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing basic and diluted EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
| | | | | | | | | | | | | | | | | | | | |
| (Millions of shares) | | 2022 | | 2021 | | 2020 |
| | | | | | |
| | | | | | |
| Basic | | 337.4 | | | 337.3 | | | 340.7 | |
| Dilutive effect of stock options and restricted share unit awards | | 0.9 | | | 1.5 | | | 1.8 | |
| Diluted | | 338.3 | | | 338.8 | | | 342.5 | |
|
| | | | | | | | | |
| (Millions of shares) | | 2017 | | 2016 | | 2015 |
| Basic | | 353.6 |
| | 359.4 |
| | 363.8 |
|
| Dilutive effect of stock options and restricted share unit awards | | 2.3 |
| | 2.3 |
| | 2.5 |
|
| Diluted | | 355.9 |
| | 361.7 |
| | 366.3 |
|
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 were insignificant. The number of common shares outstanding (in millions) as of December 31, 2017, 20162022, 2021 and 20152020 was 351.1 million, 356.6 million337.5, 336.8 and 360.9 million,338.7, respectively.
Note 13.15. 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 KCP.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
| | | | | | | | |
| 59 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes otherOther (income) and expense, net and income and expense not associated with ongoing operations of the business segments.segments, including the costs of corporate decisions related to the 2018 Global Restructuring Program which was completed in 2021 as described in Note 2, the amounts related to the acquisition of a controlling interest in Thinx in 2022 and the acquisition of Softex Indonesia in 2020 as described in Note 3, and business tax credits related to the resolution of certain Brazil tax matters in 2020 as described in Note 1.
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, reusable underwear 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, Thinx, Poise, Depend, Plenitud, PoiseSoftex and other brand names.
•Consumer Tissue offers a wide variety of innovative solutions and trusted brands that touch andresponsibly improve people's lives every day.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, Andrex, 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 Jackson Safety,KleenGuard are well-knownwell known for quality and trusted to help people around the world work better.
Net sales to Walmart Inc. as a percent of our consolidated net sales were approximately 13 percent in 2022, 14 percent in 2017, 2016 2021 and 2015.
15 percent in 2020. Net sales to Walmart Inc. were primarily in the Personal Care and Consumer Tissue segments.
|
| | | | | | | |
| 5060 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
Information concerning consolidated operations by business segment is presented in the following tables:
Consolidated Operations by Business Segment
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
NET SALES(a) | | | | | |
| Personal Care | $ | 10,622 | | | $ | 10,267 | | | $ | 9,339 | |
| Consumer Tissue | 6,243 | | | 6,034 | | | 6,718 | |
| K-C Professional | 3,256 | | | 3,072 | | | 3,019 | |
| Corporate & Other | 54 | | | 67 | | | 64 | |
| TOTAL NET SALES | $ | 20,175 | | | $ | 19,440 | | | $ | 19,140 | |
| | | | | |
OPERATING PROFIT(b) | |
| Personal Care | $ | 1,787 | | | $ | 1,856 | | | $ | 1,933 | |
| Consumer Tissue | 806 | | | 888 | | | 1,448 | |
| K-C Professional | 457 | | | 404 | | | 528 | |
Corporate & Other(c) | (412) | | | (559) | | | (719) | |
Other (income) and expense, net(d) | (43) | | | 28 | | | (54) | |
| TOTAL OPERATING PROFIT | $ | 2,681 | | | $ | 2,561 | | | $ | 3,244 | |
|
| | | | | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
NET SALES(a) | | | | | |
| Personal Care | $ | 9,078 |
| | $ | 9,046 |
| | $ | 9,204 |
|
| Consumer Tissue | 5,932 |
| | 5,967 |
| | 6,121 |
|
| K-C Professional | 3,208 |
| | 3,150 |
| | 3,219 |
|
| Corporate & Other | 41 |
| | 39 |
| | 47 |
|
| TOTAL NET SALES | $ | 18,259 |
| | $ | 18,202 |
| | $ | 18,591 |
|
| | | | | | |
OPERATING PROFIT(b) | |
| Personal Care | $ | 1,907 |
| | $ | 1,857 |
| | $ | 1,885 |
|
| Consumer Tissue | 1,034 |
| | 1,117 |
| | 1,073 |
|
| K-C Professional | 633 |
| | 603 |
| | 590 |
|
Corporate & Other(c) | (248 | ) | | (252 | ) | | (367 | ) |
Other (income) and expense, net(d) | 27 |
| | 8 |
| | 1,568 |
|
| TOTAL OPERATING PROFIT | $ | 3,299 |
| | $ | 3,317 |
| | $ | 1,613 |
|
(b) Segment operating profit excludes Other (income) and expense, net and income and expenses not associated with the business segments.
(c) Corporate & Other includes transaction and integration costs of $21 related to the acquisition of a controlling interest in Thinx in 2022 and charges of $265 and $392 related to the 2018 Global Restructuring Program in 2021 and 2020, respectively. Restructuring charges for the 2018 Global Restructuring Program related to the Personal Care, Consumer Tissue and K-C Professional business segments were $104, $118 and $40 for 2021 and $156, $176 and $53 for 2020, respectively. Corporate & Other also includes acquisition-related costs of $32 associated with the acquisition of Softex Indonesia in 2020.
(d) Other (income) and expense, net for 2022 includes the non-cash, non-recurring gain of $85 related to the acquisition of a controlling interest in Thinx. For 2020, it includes business tax credits of $77 related to a favorable legal ruling that resolved certain matters related to prior years' business taxes in Brazil.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Personal
Care | | Consumer
Tissue | | K-C
Professional | | Corporate
& Other | |
Total |
| Depreciation and Amortization | | | | | | | | | |
| 2022 | $ | 375 | | | $ | 251 | | | $ | 125 | | | $ | 3 | | | $ | 754 | |
| 2021 | 355 | | | 291 | | | 116 | | | 4 | | | 766 | |
| 2020 | 347 | | | 334 | | | 111 | | | 4 | | | 796 | |
| Capital Spending | | | | | | | | | |
| 2022 | 442 | | | 280 | | | 142 | | | 12 | | | 876 | |
| 2021 | 536 | | | 303 | | | 157 | | | 11 | | | 1,007 | |
| 2020 | 616 | | | 391 | | | 204 | | | 6 | | | 1,217 | |
| Assets | | | | | | | | | |
| 2022 | 9,086 | | | 5,048 | | | 2,675 | | | 1,161 | | | 17,970 | |
| 2021 | 8,890 | | | 5,083 | | | 2,650 | | | 1,214 | | | 17,837 | |
| 2020 | 8,486 | | | 5,227 | | | 2,551 | | | 1,259 | | | 17,523 | |
| |
(a) | Net sales in the U.S. to third parties totaled $8,698, $8,874 and $8,819 in 2017, 2016 and 2015, respectively. No other individual country's net sales exceeds 10 percent of total net sales. |
| |
(b) | Segment operating profit excludes other (income) and expense, net and income and expenses not associated with the business segments. |
| |
(c) | Corporate & Other includes charges related to the 2014 Organization Restructuring of $38and$63 in 2016 and 2015, respectively, and $5 related to the remeasurement of the Venezuelan balance sheet in 2015. Corporate & Other also includes charges of $23 for restructuring in Turkey in 2015.
|
| |
(d) | Other (income) and expense, net for 2017 includes a charge of $24 for the early redemption of debt, 2016 and 2015 includes income of $11 and a charge of $108, respectively, related to the deconsolidation of our Venezuelan operations, and 2015 includes charges of $40 related to the remeasurement of the Venezuelan balance sheet. In addition, 2015 includes $1,358 for charges related to pension settlements. |
|
| | |
| 5161 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
|
| | | | | | | | | | | | | | | | | | | |
| | Personal Care | | Consumer Tissue | | K-C Professional | | Corporate & Other | |
Total |
| Depreciation and Amortization | | | | | | | | | |
| 2017 | $ | 324 |
| | $ | 283 |
| | $ | 112 |
| | $ | 5 |
| | $ | 724 |
|
| 2016 | 305 |
| | 280 |
| | 116 |
| | 4 |
| | 705 |
|
| 2015 | 340 |
| | 282 |
| | 121 |
| | 3 |
| | 746 |
|
| Capital Spending | | | | | | | | | |
| 2017 | 405 |
| | 281 |
| | 92 |
| | 7 |
| | 785 |
|
| 2016 | 421 |
| | 250 |
| | 95 |
| | 5 |
| | 771 |
|
| 2015 | 590 |
| | 344 |
| | 116 |
| | 6 |
| | 1,056 |
|
Goodwill(a) | | | | | | | | | |
| 2017 | 617 |
| | 559 |
| | 400 |
| | — |
| | 1,576 |
|
| 2016 | 549 |
| | 538 |
| | 393 |
| | — |
| | 1,480 |
|
| 2015 | 533 |
| | 524 |
| | 389 |
| | — |
| | 1,446 |
|
| Assets | | | | | | | | | |
| 2017 | 6,592 |
| | 5,007 |
| | 2,255 |
| | 1,297 |
| | 15,151 |
|
| 2016 | 6,141 |
| | 4,761 |
| | 2,151 |
| | 1,549 |
| | 14,602 |
|
| 2015 | 6,330 |
| | 5,050 |
| | 2,264 |
| | 1,198 |
| | 14,842 |
|
| |
(a) | In 2017, we acquired the remaining 50 percent of our joint venture in India, which resulted in the recognition of $35 of personal care goodwill. All other changes in goodwill are related to currency. |
Sales of Principal Products
| | | | | | | | | | | | | | | | | | | | |
| (Billions of dollars) | | 2022 | | 2021 | | 2020 |
| Baby and child care products | | $ | 7.2 | | | $ | 7.2 | | | $ | 6.4 | |
| Consumer tissue products | | 6.2 | | | 6.0 | | | 6.7 | |
| Away-from-home professional products | | 3.3 | | | 3.1 | | | 3.0 | |
| All other | | 3.5 | | | 3.1 | | | 3.0 | |
| Consolidated | | $ | 20.2 | | | $ | 19.4 | | | $ | 19.1 | |
|
| | | | | | | | | | | | |
| (Billions of dollars) | | 2017 | | 2016 | | 2015 |
| Consumer tissue products | | $ | 5.9 |
| | $ | 6.0 |
| | $ | 6.1 |
|
| Baby and child care products | | 6.3 |
| | 6.4 |
| | 6.6 |
|
| Away-from-home professional products | | 3.2 |
| | 3.1 |
| | 3.2 |
|
| All other | | 2.9 |
| | 2.7 |
| | 2.7 |
|
| Consolidated | | $ | 18.3 |
| | $ | 18.2 |
| | $ | 18.6 |
|
Note 14.16. Supplemental Data
Supplemental Income Statement Data
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| Advertising expense | $ | 901 | | | $ | 893 | | | $ | 956 | |
| Research expense | 292 | | | 269 | | | 276 | |
| | | | | |
|
| | | | | | | | | | | |
| | Year Ended December 31 |
| | 2017 | | 2016 | | 2015 |
| Advertising expense | $ | 648 |
| | $ | 665 |
| | $ | 710 |
|
| Research expense | 311 |
| | 328 |
| | 324 |
|
|
| | |
| 52 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
|
| | | | | | | | | | | | | | | | | | | |
| | Net Sales | | Gross Profit | | Operating Profit | | Net Income | | Corporation's Share of Net Income |
| 2017 | $ | 2,191 |
| | $ | 627 |
| | $ | 378 |
| | $ | 214 |
| | $ | 104 |
|
| 2016 | 2,138 |
| | 720 |
| | 454 |
| | 276 |
| | 132 |
|
| 2015 | 2,255 |
| | 773 |
| | 497 |
| | 308 |
| | 149 |
|
| | Current Assets | | Non-Current Assets | | Current Liabilities | | Non-Current Liabilities | | Stockholders' Equity |
| 2017 | $ | 828 |
| | $ | 1,232 |
| | $ | 415 |
| | $ | 1,125 |
| | $ | 520 |
|
| 2016 | 963 |
| | 1,168 |
| | 531 |
| | 1,046 |
| | 554 |
|
| 2015 | 1,103 |
| | 993 |
| | 508 |
| | 1,068 |
| | 520 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net
Sales | | Gross
Profit | | Operating
Profit | | Net
Income | | Corporation's
Share of Net
Income |
| 2022 | $ | 2,690 | | | $ | 707 | | | $ | 438 | | | $ | 240 | | | $ | 116 | |
| 2021 | 2,501 | | | 696 | | | 398 | | | 205 | | | 98 | |
| 2020 | 2,358 | | | 786 | | | 507 | | | 299 | | | 142 | |
| Current
Assets | | Noncurrent
Assets | | Current
Liabilities | | Noncurrent
Liabilities | | Stockholders'
Equity |
| 2022 | $ | 1,585 | | | $ | 1,303 | | | $ | 814 | | | $ | 1,751 | | | $ | 323 | |
| 2021 | 1,283 | | | 1,219 | | | 809 | | | 1,334 | | | 360 | |
| 2020 | 1,585 | | | 1,203 | | | 842 | | | 1,563 | | | 382 | |
Equity companies are principally engaged in operations in the personal care and consumer tissue businesses. At December 31, 2017,2022, our ownership interest in KCMKimberly-Clark de Mexico, S.A.B. de C.V. and subsidiaries ("KCM") was 47.9 percent. KCM is partially owned by the public, and its stock is publicly traded in Mexico. At December 31, 2017,2022, our investment in this equity company was $170,$179, and the estimated fair value of the investment was $2.6$2.7 billion based on the market price of publicly traded shares. Our other equity ownership interests are not significant to our consolidated balance sheet or financial results.
At December 31, 2017,2022, undistributed net income of equity companies included in consolidated retained earnings was $1.1 billion.
| | | | | | | | |
| 62 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
Supplemental Balance Sheet Data
| | | | | | | | | | | |
| December 31 |
| Summary of Accounts Receivable, Net | 2022 | | 2021 |
| From customers | $ | 2,155 | | | $ | 2,092 | |
| Other | 189 | | | 170 | |
| Less allowance for doubtful accounts and sales discounts | (64) | | | (55) | |
| Total | $ | 2,280 | | | $ | 2,207 | |
|
| | | | | | | |
| | December 31 |
| Summary of Accounts Receivable, Net | 2017 | | 2016 |
| From customers | $ | 2,203 |
| | $ | 2,077 |
|
| Other | 168 |
| | 167 |
|
| Less allowance for doubtful accounts and sales discounts | (56 | ) | | (68 | ) |
| Total | $ | 2,315 |
| | $ | 2,176 |
|
| | | | December 31 | | December 31 |
| | 2017 | | 2016 | | 2022 | | 2021 |
| Summary of Inventories by Major Class | LIFO | | Non- LIFO | | Total | | LIFO | | Non- LIFO | | Total | Summary of Inventories by Major Class | LIFO | | Non-
LIFO | | Total | | LIFO | | Non-
LIFO | | Total |
| Raw materials | $ | 87 |
| | $ | 258 |
| | $ | 345 |
| | $ | 93 |
| | $ | 236 |
| | $ | 329 |
| Raw materials | $ | 147 | | | $ | 425 | | | $ | 572 | | | $ | 141 | | | $ | 352 | | | $ | 493 | |
| Work in process | 110 |
| | 103 |
| | 213 |
| | 114 |
| | 89 |
| | 203 |
| Work in process | 139 | | | 107 | | | 246 | | | 153 | | | 89 | | | 242 | |
| Finished goods | 421 |
| | 684 |
| | 1,105 |
| | 430 |
| | 600 |
| | 1,030 |
| Finished goods | 518 | | | 870 | | | 1,388 | | | 607 | | | 835 | | | 1,442 | |
| Supplies and other | — |
| | 303 |
| | 303 |
| | — |
| | 280 |
| | 280 |
| Supplies and other | — | | | 302 | | | 302 | | | — | | | 280 | | | 280 | |
| | 618 |
| | 1,348 |
| | 1,966 |
| | 637 |
| | 1,205 |
| | 1,842 |
| | 804 | | | 1,704 | | | 2,508 | | | 901 | | | 1,556 | | | 2,457 | |
| Excess of FIFO or weighted-average cost over LIFO cost | (176 | ) | | — |
| | (176 | ) | | (163 | ) | | — |
| | (163 | ) | Excess of FIFO or weighted-average cost over LIFO cost | (239) | | | — | | | (239) | | | (218) | | | — | | | (218) | |
| Total | $ | 442 |
| | $ | 1,348 |
| | $ | 1,790 |
| | $ | 474 |
| | $ | 1,205 |
| | $ | 1,679 |
| Total | $ | 565 | | | $ | 1,704 | | | $ | 2,269 | | | $ | 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.
| | | | | | | | | | | |
| December 31 |
| Summary of Property, Plant and Equipment, Net | 2022 | | 2021 |
| Land | $ | 156 | | | $ | 169 | |
| Buildings | 3,062 | | | 2,993 | |
| Machinery and equipment | 14,655 | | | 14,606 | |
| Construction in progress | 676 | | | 760 | |
| 18,549 | | | 18,528 | |
| Less accumulated depreciation | (10,664) | | | (10,431) | |
| Total | $ | 7,885 | | | $ | 8,097 | |
|
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| 53 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
|
| | | | | | | |
| | December 31 |
| Summary of Property, Plant and Equipment, Net | 2017 | | 2016 |
| Land | $ | 173 |
| | $ | 163 |
|
| Buildings | 2,830 |
| | 2,612 |
|
| Machinery and equipment | 14,612 |
| | 13,591 |
|
| Construction in progress | 300 |
| | 488 |
|
| | 17,915 |
| | 16,854 |
|
| Less accumulated depreciation | (10,479 | ) | | (9,685 | ) |
| Total | $ | 7,436 |
| | $ | 7,169 |
|
Property, plant and equipment, net in the U.S. as of December 31, 20172022 and 20162021 was $3,591$4,273 and $3,638,$4,165, respectively.
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| 63 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
| | | | | | | | December 31 |
| | December 31 | |
| Summary of Accrued Expenses | 2017 | | 2016 | |
| Summary of Accrued Expenses and Other Current Liabilities | | Summary of Accrued Expenses and Other Current Liabilities | 2022 | | 2021 |
| Accrued advertising and promotion | $ | 394 |
| | $ | 373 |
| Accrued advertising and promotion | $ | 455 | | | $ | 434 | |
| Accrued salaries and wages | 449 |
| | 426 |
| Accrued salaries and wages | 421 | | | 403 | |
| Accrued rebates | 227 |
| | 220 |
| Accrued rebates | 285 | | | 249 | |
| Accrued taxes - income and other | 249 |
| | 259 |
| Accrued taxes - income and other | 318 | | | 323 | |
| Operating leases | | Operating leases | 127 | | | 130 | |
| Accrued restructuring | | Accrued restructuring | — | | | 75 | |
| Accrued interest | 68 |
| | 96 |
| Accrued interest | 82 | | | 85 | |
| Derivatives | 45 |
| | 44 |
| |
| Derivative liabilities | | Derivative liabilities | 200 | | | 23 | |
| Other | 298 |
| | 357 |
| Other | 401 | | | 374 | |
| Total | $ | 1,730 |
| | $ | 1,775 |
| Total | $ | 2,289 | | | $ | 2,096 | |
Supplemental Cash Flow Statement Data
| | | | | | | | | | | | | | | | | |
| Summary of Cash Flow Effects of Operating Working Capital | Year Ended December 31 |
| 2022 | | 2021 | | 2020 |
| Accounts receivable | $ | (151) | | | $ | (37) | | | $ | 95 | |
| Inventories | (76) | | | (417) | | | (96) | |
| Trade accounts payable | 109 | | | 627 | | | 239 | |
| Accrued expenses | 92 | | | (124) | | | 132 | |
| Accrued income taxes | 20 | | | (4) | | | 42 | |
| Derivatives | 9 | | | 30 | | | (9) | |
| Currency and other | (20) | | | (29) | | | (40) | |
| Total | $ | (17) | | | $ | 46 | | | $ | 363 | |
|
| | | | | | | | | | | |
| Summary of Cash Flow Effects of Operating Working Capital | Year Ended December 31 |
| 2017 | | 2016 | | 2015 |
| Accounts receivable | $ | (44 | ) | | $ | (23 | ) | | $ | 60 |
|
| Inventories | (33 | ) | | 230 |
| | (28 | ) |
| Trade accounts payable | 174 |
| | (61 | ) | | 44 |
|
| Accrued expenses | (102 | ) | | 26 |
| | (110 | ) |
| Accrued income taxes | (176 | ) | | 121 |
| | (81 | ) |
| Derivatives | (47 | ) | | 43 |
| | (63 | ) |
| Currency and other | 80 |
| | (2 | ) | | (267 | ) |
| Total | $ | (148 | ) | | $ | 334 |
| | $ | (445 | ) |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31 |
| Other Cash Flow Data | 2022 | | 2021 | | 2020 |
| Interest paid | $ | 270 | | | $ | 243 | | | $ | 245 | |
| Income taxes paid | 468 | | | 492 | | | 533 | |
|
| | | | | | | | | | | |
| | Year Ended December 31 |
| Other Cash Flow Data | 2017 | | 2016 | | 2015 |
| Interest paid | $ | 354 |
| | $ | 315 |
| | $ | 308 |
|
| Income taxes paid | 961 |
| | 744 |
| | 695 |
|
|
| | | | | | | |
| 5464 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
Note 15. Subsequent Events - Announcement of 2018 Global Restructuring Program
On January 23, 2018, we announced a new global restructuring program. The 2018 Global Restructuring Program will reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. The program will make our overhead organization structure and manufacturing supply chain less complex and more efficient. We expect to close or sell approximately 10 manufacturing facilities and expand production capacity at several others. We expect to exit or divest some lower-margin businesses that generate approximately 1 percent of our net sales. The sales are concentrated in our consumer tissue business segment. The restructuring is expected to impact all of our business segments and our organizations in all major geographies. Workforce reductions are expected to be in the range of 5,000 to 5,500. Certain capital appropriations under the 2018 Global Restructuring Program are being finalized. Accounting for actions related to each appropriation will commence when the appropriation is authorized for execution.
The restructuring is expected to be completed by the end of 2020, with total costs anticipated to be $1.7 billion to $1.9 billion pre-tax ($1.35 billion to $1.5 billion after tax). Cash costs are expected to be $900 to $1.0 billion, primarily related to workforce reductions. Non-cash charges are expected to be $800 to $900 pre-tax and will primarily consist of incremental depreciation and asset impairments. Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax ($950 to $1.05 billion after tax).
|
| | |
| 55 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholdersstockholders and the Board of Directors of
Kimberly-Clark Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Kimberly-Clark Corporation and subsidiaries (the "Corporation") as of December 31, 20172022 and 2016,2021, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2017,2022, and the related notes and the financial statement schedule listed in the Table of Contents at Item 15 (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation’sCorporation's internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 8, 2018,9, 2023, expressed an unqualified opinion on the Corporation’sCorporation's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Corporation’sCorporation's management. Our responsibility is to express an opinion on the Corporation’sCorporation's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sales Incentives and Trade Promotion Allowances —Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Corporation utilizes various trade promotion programs globally. The cost of promotion activities is classified as a reduction in sales revenue and can result in a period of time between the date the customer earns a promotion and the date the customer claims the promotion. The Corporation records an accrual for estimated promotions using customer sales associated with valid promotion events, actual promotion claims, and forecasted information of amounts earned by the customer but not yet claimed. As of December 31, 2022, the accrual balance was approximately $426 million.
We identified trade promotions and the related accrual as a critical audit matter because of the complexity and volume of the Corporation’s processes related to trade promotion programs and the subjectivity of estimating future customer claims. This required an extensive audit effort due to the complexity and volume of the trade promotion programs and information systems utilized globally as well as the subjectivity of estimating future customer claims related to the trade promotion accrual.
| | | | | | | | |
| 65 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the reduction in revenue associated with trade promotions and the related accrual included the following, among others:
•With the assistance of our IT specialists, we:
- Identified the significant systems used to process trade promotion transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls
- Tested the effectiveness of automated controls over revenue streams, including those over the evaluation of the accuracy and completeness of trade promotions
•We tested the effectiveness of controls over the trade promotions and the related accrual, including those over the quantity of customer sales associated with valid promotion events and the estimated future promotion claims associated with the trade accrual.
•We evaluated trade promotion transactions using either analytical procedures or by evaluating individual transactions. When analytical procedures were performed, we developed an expectation for reduction in revenue associated with trade promotions based on the relationship with gross sales adjusted for changes in data, which consist of changes in product mix, sales margin, or inflation, and compared to the recorded amount. When individual promotion transactions were evaluated, we obtained evidence of the promotion agreement with the customer and the amounts of the promotions earned.
•We evaluated management’s ability to estimate future promotion claims by comparing actual promotion claims to management’s historical estimates.
•We evaluated the reasonableness of management’s estimate of future promotion claims by testing the underlying data related to (1) customer sales associated with valid promotion events, (2) actual promotion claims, and (3) forecasted information.
| | |
/s/ DELOITTE & TOUCHE LLP |
| Deloitte & Touche LLP |
| Dallas, Texas |
February 8, 20189, 2023 |
We have served as the Corporation’s auditor since 1928.
|
| | | | | | | |
| 5666 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
| |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
| |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of December 31, 2017,2022, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934 (Exchange Act)). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of December 31, 2017.2022.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, including safeguarding of assets against unauthorized acquisition, use or disposition. This system is designed to provide reasonable assurance to management and our Board of Directors regarding preparation of reliable published financial statements and safeguarding of our assets. This system is supported with written policies and procedures, contains self-monitoring mechanisms and is audited by the internal audit function. Appropriate actions are taken by management to correct deficiencies as they are identified. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls, and, therefore, can provide only reasonable assurance as to the reliability of financial statement preparation and such asset safeguarding.
We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.2022. In making this assessment, we used the criteria described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2017,2022, our internal control over financial reporting is effective.
Deloitte & Touche LLP has audited the effectiveness of our internal control over financial reporting as of December 31, 2017,2022, and has expressed an unqualified opinion in their report, which appears in this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation described above in "Internal Control Over Financial Reporting" that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholdersstockholders and the Board of Directors of
Kimberly-Clark Corporation:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Kimberly-Clark Corporation and subsidiaries (the “Corporation”) as of December 31, 2017,2022, based on criteria established in Internal Control –— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control –— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheetsfinancial statements as of December 31, 2017 and 2016,for the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the periodyear ended December 31, 2017,2022, of the Corporation and our report dated February 8, 2018,9, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control Over
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| 57 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
| | | | | | | | |
| 67 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A corporation’scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation;company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the corporationcompany are being made only in accordance with authorizations of management and directors of the corporation;company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the corporation’scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|
| |
/s/ DELOITTE & TOUCHE LLP |
| Deloitte & Touche LLP |
| Dallas, Texas |
February 8, 20189, 2023 |
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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| 5868 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following sections of our 20182023 Proxy Statement for the Annual Meeting of Stockholders (the "2018"2023 Proxy Statement") are incorporated in this Item 10 by reference:
•"The Nominees" under "Proposal 1. Election of Directors," which identifies our directors and nominees for our Board of Directors.
"Other Information - Section 16(a) Beneficial Ownership Reporting Compliance."
•"Corporate Governance - Other Corporate Governance Policies and Practices - Code of Conduct," which describes our Code of Conduct.
•"Corporate Governance - Stockholder Rights," "Proposal 1. Election of Directors," "Other Information - Stockholder Director Nominees for Inclusion in Next Year's Proxy Statement," and "Other Information - Stockholder Director Nominees Not Included in Next Year's Proxy Statement," which describe the procedures by which stockholders may nominate candidates for election to our Board of Directors.
•"Corporate Governance - Board Committees - Audit Committee," which identifies members of the Audit Committee of our Board of Directors and audit committee financial experts.
Information regarding our executive officers is reported under the caption "Executive Officers of the Registrant""Information About Our Executive Officers" in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information in the sections of our 20182023 Proxy Statement captioned "Compensation Discussion and Analysis," "Compensation Tables," "Director Compensation," "Corporate Governance - Compensation Committee Interlocks and Insider Participation" andParticipation," "Other Information - CEO Pay Ratio Disclosure" and "Other Information - Pay Versus Performance" is incorporated in this Item 11 by reference.
| |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in the sections of our 20182023 Proxy Statement captioned "Compensation Tables - Equity Compensation Plan Information" and "Other Information - Security Ownership Information" is incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information in the sections of our 20182023 Proxy Statement captioned "Other Information - Transactions with Related Persons" and "Corporate Governance - Director Independence" is incorporated in this Item 13 by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES (Deloitte & Touche LLP, PCAOB ID 34)
The information in the sections of our 20182023 Proxy Statement captioned "Principal Accounting Firm Fees" and "Audit Committee Approval of Audit and Non-Audit Services" under "Proposal 2. Ratification of Auditor" is incorporated in this Item 14 by reference.
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| 5969 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| |
(a) | Documents filed as part of this report. |
(a)Documents filed as part of this report.
1.Financial statements.
The financial statements are set forth under Item 8 of this report on Form 10-K.
| |
2. | Financial statement schedules. |
2.Financial statement schedules.
The following information is filed as part of this Form 10-K and should be read in conjunction with the financial statements contained in Item 8:
•Report of Independent Registered Public Accounting Firm
Schedule for Kimberly-Clark Corporation and Subsidiaries:
•Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they were not applicable or because the required information has been included in the financial statements or notes thereto.
3.Exhibits
| | | | | |
| Exhibit No. (4)d. | Eighth Supplemental Indenture, dated as of October 27, 2021, to the Indenture, among the Corporation, The Bank of New York Mellon Trust Company, N.A., as successor trustee, and U.S. Bank National Association, as successor trustee, incorporated by reference to Exhibit No. 4.3 of the Corporation's Current Report on Form 8-K filed on November 2, 2021 |
| | | | | |
| Exhibit No. (4)e. | Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request. |
| | | | | | | | |
| 70 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
|
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| 60 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
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| 71 | KIMBERLY-CLARK CORPORATION - 2022 Annual Report |
|
| | | | |
Exhibit No. (10)v.s. | Tax Matters Agreement, dated October 31, 2014, between Halyard Health, Inc. and the Corporation,First Amendment to 2011 Equity Participation Plan, effective February 12, 2020, incorporated by reference to Exhibit No. 10.1(10)s of the Corporation's CurrentAnnual Report on Form 8-K filed on November 5, 2014.10-K for the year ended December 31, 2019.* |
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| 61 | KIMBERLY-CLARK CORPORATION - 2017 Annual Report
|
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| | | | |
| Exhibit No. (101).INS | XBRL Instance Document - the instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
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| | | | |
| Exhibit No. (101).SCH | XBRL Taxonomy Extension Schema Document |
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| Exhibit No. (101).CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
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| Exhibit No. (101).DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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| Exhibit No. (101).LAB | XBRL Taxonomy Extension Label Linkbase Document |
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| Exhibit No. (101).PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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*Exhibit No. 104 | The cover page from this Current Report on Form 10-K formatted as Inline XBRL |
| | | | | |
| * | A management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this Annual Report on Form 10-K. |
ITEM 16. FORM 10-K SUMMARY
None.
|
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| 6272 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| | | | | | | | |
| KIMBERLY-CLARK CORPORATION |
| | |
| February 9, 2023 | KIMBERLY-CLARK CORPORATIONBy: | /s/ Andrew S. Drexler |
| | |
February 8, 2018 | By: | /s/ Maria Henry |
| | Maria Henry |
| | Senior Andrew S. Drexler
Vice President and Chief Financial OfficerController |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
| | | | | | | | | | |
/s/ Thomas J. FalkMichael D. Hsu | | Chairman of the Board and Chief Executive Officer and Director
(principal executive officer)
| February 8, 2018 |
Thomas J. Falk | | |
| | | |
/s/ Maria Henry | | Senior Vice President and Chief Financial Officer
(principal financial officer)
| February 8, 2018 |
Maria Henry | | |
| | | |
/s/ Michael T. Azbell | | Vice President and Controller
(principal accounting officer)
| February 8, 2018 |
Michael T. Azbell | | |
Directors
|
| | |
John F. Bergstrom | | James M. Jenness |
Abelardo E. Bru | | Nancy J. Karch |
Robert W. Decherd | | Christa S. Quarles |
Fabian T. Garcia | | Ian C. Read9, 2023 |
| Michael D. Hsu | | Marc J. Shapiro |
Mae C. Jemison | | Michael D. White |
|
| | | |
By: | /s/ Jeffrey P. Melucci Nelson Urdaneta | | Senior Vice President and Chief Financial Officer
(principal financial officer) | February 8, 20189, 2023 |
| Nelson Urdaneta | Jeffrey P. Melucci
Attorney-in-Fact
| |
| | | |
| /s/ Andrew S. Drexler | | Vice President and Controller
(principal accounting officer) | February 9, 2023 |
| Andrew S. Drexler | | |
| | | | | | | | |
| Directors |
| | |
| Sylvia M. Burwell | 63 | Sherilyn S. McCoy |
| John W. Culver | | Christa S. Quarles |
| Robert W. Decherd | | Jaime A. Ramirez |
| Mae C. Jemison | | Dunia A. Shive |
| S. Todd Maclin | | Mark T. Smucker |
| Deirdre A. Mahlan | | Michael D. White |
| | |
| | | | | | | | | | | |
| By: | /s/ Andrew S. Drexler | | February 9, 2023 |
| Andrew S. Drexler
Attorney-in-Fact | | |
| | | | | | | | |
| 73 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2017, 20162022, 2021 AND 20152020
(Millions of dollars)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | Balance at
Beginning
of Period | | Additions | | Deductions | | | | |
Charged to
Costs and
Expenses | | Charged to Other Accounts(a) | | Write-Offs and
Reclassifications | | | | Balance
at End of
Period |
| December 31, 2022 | | | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | | | |
| Allowance for doubtful accounts | $ | 40 | | | $ | 14 | | | $ | (3) | | | $ | 4 | | (b) | | | $ | 47 | |
| Allowances for sales discounts | 15 | | | 239 | | | (3) | | | 234 | | (c) | | | 17 | |
| December 31, 2021 | | | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | | | |
| Allowance for doubtful accounts | $ | 34 | | | $ | 12 | | | $ | (4) | | | $ | 2 | | (b) | | | $ | 40 | |
| Allowances for sales discounts | 16 | | | 225 | | | (2) | | | 224 | | (c) | | | 15 | |
| December 31, 2020 | | | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | | | |
| Allowance for doubtful accounts | $ | 32 | | | $ | 3 | | | $ | 1 | | | $ | 2 | | (b) | | | $ | 34 | |
| Allowances for sales discounts | 17 | | | 240 | | | (3) | | | 238 | | (c) | | | 16 | |
|
| | | | | | | | | | | | | | | | | | | |
| Description | Balance at Beginning of Period | | Additions | | Deductions | | |
Charged to Costs and Expenses | | Charged to Other Accounts(a) | | Write-Offs and Reclassifications | | Balance at End of Period |
| December 31, 2017 | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | |
| Allowance for doubtful accounts | $ | 50 |
| | $ | 8 |
| | $ | 2 |
| | $ | 22 |
| (b) | $ | 38 |
|
| Allowances for sales discounts | 18 |
| | 247 |
| | — |
| | 247 |
| (c) | 18 |
|
| December 31, 2016 | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | |
| Allowance for doubtful accounts | $ | 50 |
| | $ | 8 |
| | $ | 3 |
| | $ | 11 |
| (b) | $ | 50 |
|
| Allowances for sales discounts | 15 |
| | 254 |
| | — |
| | 251 |
| (c) | 18 |
|
| December 31, 2015 | | | | | | | | | |
| Allowances deducted from assets to which they apply | | | | | | | | | |
| Allowance for doubtful accounts | $ | 50 |
| | $ | 12 |
| | $ | (10 | ) | | $ | 2 |
| (b) | $ | 50 |
|
| Allowances for sales discounts | 16 |
| | 256 |
| | (1 | ) | | 256 |
| (c) | 15 |
|
(b)Primarily uncollectible receivables written off.
(c)Sales discounts allowed.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Additions | | | | | | |
| Description | Balance at
Beginning
of Period | | Charged to
Costs and
Expenses | | Charged to
Other
Accounts | | Deductions(a) | | | | Balance
at End
of Period |
| December 31, 2022 | | | | | | | | | | | |
| Deferred taxes | | | | | | | | | | | |
| Valuation allowance | $ | 279 | | | $ | 37 | | | $ | — | | | $ | 17 | | | | | $ | 299 | |
| December 31, 2021 | | | | | | | | | | | |
| Deferred taxes | | | | | | | | | | | |
| Valuation allowance | $ | 272 | | | $ | 12 | | | $ | — | | | $ | 5 | | | | | $ | 279 | |
| December 31, 2020 | | | | | | | | | | | |
| Deferred taxes | | | | | | | | | | | |
| Valuation allowance | $ | 248 | | | $ | 21 | | | $ | — | | | $ | (3) | | | | | $ | 272 | |
(a)Represents the net currency effects of translating valuation allowances at current rates of exchange.
| |
(a) | Includes bad debt recoveries and the effects of changes in foreign currency exchange rates. |
| |
(b) | Primarily uncollectible receivables written off. |
| |
(c) | Sales discounts allowed. |
|
| | | | | | | | | | | | | | | | | | | |
| | | | Additions | | | | |
| Description | Balance at Beginning of Period | | Charged to Costs and Expenses | | Charged to Other Accounts | | Deductions(a) | | Balance at End of Period |
| December 31, 2017 | | | | | | | | | |
| Deferred taxes | | | | | | | | | |
| Valuation allowance | $ | 225 |
| | $ | (59 | ) | | $ | — |
| | $ | (10 | ) | | $ | 176 |
|
| December 31, 2016 | | | | | | | | | |
| Deferred taxes | | | | | | | | | |
| Valuation allowance | $ | 274 |
| | $ | (45 | ) | | $ | — |
| | $ | 4 |
| | $ | 225 |
|
| December 31, 2015 | | | | | | | | | |
| Deferred taxes | | | | | | | | | |
| Valuation allowance | $ | 215 |
| | $ | 78 |
| | $ | — |
| | $ | 19 |
| | $ | 274 |
|
| |
(a) | Represents the net currency effects of translating valuation allowances at current rates of exchange. |
|
| | |
| 6474 | KIMBERLY-CLARK CORPORATION - 20172022 Annual Report |
