01—Abstract
Summary
Summary of the 10-K filed February 8, 2018. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation reported 2017 net sales of $18.3 billiona, up slightly from $18.2 billion in 2016, with favorable currency rates adding less than 1 percent.
Organic sales were similar year over year as volumes rose about 1 percent, offset by lower net selling prices and $355 millionb of higher input costs. Operating profit was $3,299 million, compared with $3,317 million in 2016, and net income attributable to the company was $2,278 million. Diluted earnings per share were $6.40, up from $5.99, and included a net benefit of $0.17 from U.S. tax reform.
Adjusted diluted EPS was $6.23c, compared with $6.03 in 2016. The effective tax rate fell to 25.9 percent from 30.6 percent. In January 2018 the company announced the 2018 Global Restructuring Program, which is expected to be completed by the end of 2020.
Total pre-tax costs are estimated at $1.7 billion to $1.9 billiond, with cash costs of $900 million to $1.0 billion, and annual pre-tax savings of $500 million to $550 million by 2021. The program targets about 10 manufacturing facility closures or sales and workforce reductions of 5,000 to 5,500. For 2018, the company guided to diluted EPS of $3.90 to $4.50 and adjusted EPS of $6.90 to $7.20, excluding restructuring charges of $2.70 to $3.00 per share.
Cash provided by operations was $2.9 billion in 2017, down from $3.2 billion, reflecting higher tax payments. The company repurchased 7.2 million shares for $900 million and paid $1.4 billion in dividends, and it raised its dividend by 5.4 percent in 2017 with a further 3.1 percent increase approved for 2018.
Total debt was $7.4 billion at year-end. Walmart Inc. accounted for approximately 14 percent of net sales in each of 2017, 2016 and 2015.
02—Key points
Key Highlights
- Net sales of $18.3 billion, up slightly from $18.2 billion in 2016; organic sales were similar year over year as volumes rose about 1 percent.
- Diluted EPS of $6.40 vs. $5.99 in 2016, including a $0.17 net benefit from U.S. tax reform; adjusted diluted EPS was $6.23 vs. $6.03.
- Operating profit of $3,299 million, essentially flat versus $3,317 million; $355 million of higher input costs and lower net selling prices weighed on results, partly offset by $450 million of FORCE cost savings.
- 2018 Global Restructuring Program announced January 23, 2018: total pre-tax costs of $1.7 billion to $1.9 billion, workforce reductions of 5,000 to 5,500, and annual pre-tax savings of $500 million to $550 million by 2021.
- 2018 guidance: diluted EPS of $3.90 to $4.50 and adjusted EPS of $6.90 to $7.20, with net sales expected to rise 1 to 2 percent.
- Cash provided by operations fell to $2.9 billion from $3.2 billion, mainly due to higher tax payments; $1.4 billion of dividends paid and $900 million of share repurchases in 2017.
- Balance sheet: total debt of $7.4 billion at year-end 2017 versus $7.6 billion a year earlier, and an unused $2.0 billion revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Kimberly-Clark kept $0.12.
- Revenue$18.35B100.0%
- Cost of revenue−$11.76B64.1%
- Gross profit$6.59B35.9%
- Operating costs−$3.23B17.6%
- Operating income$3.36B18.3%
- Interest, other & tax−$1.08B5.9%
- Net income$2.28B12.4%
Where FY2017 revenue went
$18.35B- Cost of revenue: $11.76B, 64% of revenue
- Other operating costs: $2.92B, 16% of revenue
- Net income: $2.28B, 12% of revenue
- R&D: $309.0M, 1.7% of revenue
- Interest, other & tax: $1.08B, 5.9% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 8, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $18.35B$18.29B | +0.3% |
| Cost of Revenue | $11.76B$11.60B | +1.4% |
| Gross Profit | $6.59B$6.69B | −1.6% |
| R&D Expenses | $309.00M$326.00M | −5.2% |
| Operating Income | $3.36B$3.38B | −0.7% |
| Interest Expense | $318.00M$319.00M | −0.3% |
| Net Income | $2.28B$2.17B | +5.2% |
| EPS (Basic) | $6.44$6.03 | +6.8% |
| EPS (Diluted) | $6.40$5.99 | +6.8% |
| Shares Outstanding (Basic) | 353.60M359.40M | −1.6% |
| Shares Outstanding (Diluted) | 355.90M361.70M | −1.6% |
05—Questions
Frequently Asked Questions
What drove the change in Kimberly-Clark's 2017 earnings?
Diluted EPS rose to $6.40 from $5.99, and the filing attributes the change to a lower share count and higher earnings. Reported results included a net benefit of $0.17 per share from U.S. tax reform. Operating profit was roughly flat at $3,299 million, as cost savings and reduced marketing spending were offset by lower net selling prices and $355 million of higher input costs.
What is the 2018 Global Restructuring Program and what does it cost?
The program, announced January 23, 2018, aims to reduce the structural cost base by streamlining the manufacturing supply chain and overhead organization. Total costs are expected to be $1.7 billion to $1.9 billion pre-tax ($1.35 billion to $1.5 billion after tax), with cash costs of $900 million to $1.0 billion. It is expected to close or sell about 10 manufacturing facilities, reduce the workforce by 5,000 to 5,500, and generate annual pre-tax savings of $500 million to $550 million by 2021. Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax.
What does Kimberly-Clark expect for 2018 earnings?
The company expects diluted EPS of $3.90 to $4.50 and adjusted EPS of $6.90 to $7.20, which excludes restructuring charges equivalent to $2.70 to $3.00 per share. Guidance assumes net sales growth of 1 to 2 percent, organic sales growth of about 1 percent, adjusted operating profit growth of 2 to 5 percent, and an adjusted effective tax rate of 23 to 26 percent.
How much did Kimberly-Clark return to shareholders and how concentrated is its customer base?
In 2017 the company repurchased 7.2 million shares for $900 million and paid $1.4 billion in dividends. It raised its dividend by 5.4 percent in 2017, its 45th consecutive annual increase, and approved a 3.1 percent increase for 2018. Net sales to Walmart Inc. were approximately 14 percent of consolidated net sales in each of 2017, 2016 and 2015.
What significant legal matter does the filing disclose?
The company is party to legal proceedings relating to its former health care business, Halyard. These include Bahamas Surgery Center v. Kimberly-Clark Corporation, a California consumer class action over surgical gowns in which a jury on April 7, 2017 awarded the plaintiff class compensatory damages and $350 million in punitive damages. The company has filed motions challenging the verdict, and Halyard is obligated under the spin-off distribution agreement to indemnify the company for these matters, though both parties have filed suits over the scope of that obligation.
06—Continue