01—Abstract
Summary
Summary of the 10-K filed February 7, 2019. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 2018 results were shaped by its 2018 Global Restructuring Program and rising input costs.
Net sales rose 1 percent to $18.5 billiona ($18,486 million), with organic sales growth of more than 1 percent partly offset by unfavorable currency. Operating profit fell to $2,229 million from $3,358 million, and diluted EPS was $4.03 versus $6.40 in 2017. Adjusted operating profit was $3,138 million and adjusted diluted EPS was $6.61 (non-GAAP), which excludes restructuring charges of $2.24 per share and a $0.33 per share net charge for U.S. tax reform matters.
Input cost inflation of $795 millionb, driven by $460 million in pulp, was partly offset by $375 million in FORCE program savings and $135 million in restructuring savings. The company is restructuring to reduce its cost base. The 2018 Global Restructuring Program is expected to cost $1.7 billion to $1.9 billion pre-tax through 2020, with annual pre-tax savings of $500 to $550 million by 2021.
It includes closing or selling about 10 manufacturing facilities and workforce reductions of 5,000 to 5,500. Cash flow from operations was $2.97 billionc in 2018, and the company paid $1.4 billion in dividends and repurchased $800 million of stock. Total stockholders' equity was negative $46 million at year-end 2018, down from $882 million, with accumulated other comprehensive loss of $3,299 million.
For 2019, management guides to diluted EPS of $4.85 to $5.35d and adjusted EPS of $6.50 to $6.70. The guidance assumes net sales decline of 1 to 2 percent, organic sales growth of about 2 percent, and an adjusted effective tax rate of 23 to 25 percent. Walmart accounted for approximately 14 percent of net sales in 2018, and the company has over 20 consecutive years of dividend increases, having raised its dividend 3.1 percent in 2018 to a 46th consecutive annual increase.
02—Key points
Key Highlights
- Net sales of $18.5 billion ($18,486 million) rose 1 percent; operating profit declined 34 percent to $2,229 million from $3,358 million, reflecting $1,036 million in pre-tax restructuring charges.
- Diluted EPS was $4.03 versus $6.40 in 2017; adjusted diluted EPS (non-GAAP) was $6.61 versus $6.23.
- Input cost inflation of $795 million, including $460 million in pulp, was partly offset by $375 million in FORCE savings and $135 million from the 2018 Global Restructuring Program.
- The 2018 Global Restructuring Program targets $1.7–$1.9 billion pre-tax costs through 2020 and $500–$550 million in annual pre-tax savings by 2021, including closing or selling about 10 manufacturing facilities.
- Cash provided by operations was $2,970 million; the company returned $2.2 billion through dividends ($1,386 million paid) and share repurchases ($800 million).
- Total stockholders' equity was $(46) million at December 31, 2018, down from $882 million, with accumulated other comprehensive loss of $3,299 million.
- 2019 guidance: diluted EPS of $4.85–$5.35 and adjusted EPS of $6.50–$6.70, with net sales expected to decrease 1 to 2 percent and organic sales to increase about 2 percent.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Kimberly-Clark kept $0.08.
- Revenue$18.49B100.0%
- Cost of revenue−$12.89B69.7%
- Gross profit$5.60B30.3%
- Operating costs−$3.37B18.2%
- Operating income$2.23B12.1%
- Interest, other & tax−$819.0M4.4%
- Net income$1.41B7.6%
Where FY2018 revenue went
$18.49B- Cost of revenue: $12.89B, 70% of revenue
- Other operating costs: $3.05B, 17% of revenue
- Net income: $1.41B, 7.6% of revenue
- R&D: $317.0M, 1.7% of revenue
- Interest, other & tax: $819.0M, 4.4% of revenue
Kept 7.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 7, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $18.49B$18.35B | +0.8% |
| Cost of Revenue | $12.89B$11.76B | +9.6% |
| Gross Profit | $5.60B$6.59B | −15.0% |
| R&D Expenses | $317.00M$309.00M | +2.6% |
| Operating Income | $2.23B$3.36B | −33.6% |
| Interest Expense | $263.00M$318.00M | −17.3% |
| Net Income | $1.41B$2.28B | −38.1% |
| EPS (Basic) | $4.05$6.44 | −37.1% |
| EPS (Diluted) | $4.03$6.40 | −37.0% |
| Shares Outstanding (Basic) | 348.00M353.60M | −1.6% |
| Shares Outstanding (Diluted) | 349.60M355.90M | −1.8% |
05—Questions
Frequently Asked Questions
Why did operating profit fall so sharply in 2018?
Operating profit fell to $2,229 million from $3,358 million. The filing attributes this mainly to $1,036 million in pre-tax charges from the 2018 Global Restructuring Program, along with $795 million of higher input costs, partly offset by organic sales growth and $375 million of FORCE cost savings.
What is the 2018 Global Restructuring Program?
It is a program announced in January 2018 to reduce the structural cost base by streamlining the manufacturing supply chain and overhead organization. It is expected to close or sell about 10 manufacturing facilities, exit lower-margin businesses generating about 1 percent of net sales, and reduce workforce by 5,000 to 5,500. It is expected to be completed by the end of 2020, with total pre-tax costs of $1.7 billion to $1.9 billion.
What does the company expect for 2019?
The company expects diluted EPS of $4.85 to $5.35 and adjusted EPS of $6.50 to $6.70, excluding restructuring charges of $1.35 to $1.65 per share. It expects net sales to decrease 1 to 2 percent, organic sales to increase about 2 percent, and an adjusted effective tax rate of 23 to 25 percent, compared with 21 percent in 2018.
How is the company returning capital to shareholders?
In 2018 the company paid $1.4 billion in dividends and repurchased 7.3 million shares for $800 million. It raised its dividend 3 percent for 2019 and targets 2019 share repurchases of $600 to $900 million, subject to market conditions.
How concentrated is the company's customer base?
Net sales to Walmart Inc. were approximately 14 percent of consolidated net sales in 2018, 2017 and 2016. The filing notes that increasing dependence on key retailers may give large customers bargaining power over trade discounts and allowances.
06—Continue