01—Abstract
Summary
Summary of the 10-K filed February 13, 2020. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 2019 Form 10-K reports net sales of $18.5 billiona, even with 2018, with organic sales up 4 percent and currency reducing sales by 3 percent.
Operating profit rose to $2,991 millionb from $2,229 million, and net income attributable to Kimberly-Clark was $2,157 million, or $6.24 diluted earnings per share, compared with $4.03 in 2018. The 2018 results included large restructuring charges, so the year-over-year comparison is distorted. On an adjusted basis (non-GAAP), operating profit was $3,281 million, up 5 percent, and adjusted diluted earnings per share were $6.89, up 4 percent from $6.61.
Segment performance was mixed. Personal Care net sales were $9,108 millionc with operating profit of $1,904 million. Consumer Tissue operating profit rose 15 percent to $1,007 million on higher net selling prices and cost savings, though volumes fell.
K-C Professional net sales declined to $3,292 milliond, with operating profit of $657 million. Cash provided by operations fell to $2.7 billion from $3.0 billion, mainly due to higher working capital and tax payments. The company paid $1.4 billion in dividends and repurchased $800 million of shares, and it guided to a 3.9 percent dividend increase for 2020.
The 2018 Global Restructuring Program is central to the outlook. Annual pre-tax savings are expected to reach $500 to $550 million by 2021, with $165 million realized in 2019 and $300 million cumulative.
Total program costs are estimated at $1.7 billion to $1.9 billion pre-tax, with restructuring charges of $300 to $500 million expected in 2020. The filing also discloses a Department of Justice investigation tied to the former health care business and a $25 million Bahamas Surgery Center judgment that the company is contesting.
02—Key points
Key Highlights
- Net sales were $18.5 billion, flat versus 2018, with organic sales up 4 percent and currency reducing sales by 3 percent.
- GAAP diluted EPS was $6.24, up from $4.03; adjusted diluted EPS was $6.89, up 4 percent from $6.61.
- Operating profit rose to $2,991 million from $2,229 million; adjusted operating profit was $3,281 million, up 5 percent.
- Cash provided by operations was $2.7 billion, down from $3.0 billion, driven by working capital and tax payments.
- The 2018 Global Restructuring Program is expected to deliver $500 to $550 million of annual pre-tax savings by 2021, with $300 million cumulative savings through 2019.
- Shareholder returns totaled $2.2 billion in 2019, including $1.4 billion in dividends and $800 million in share repurchases; the 2020 dividend was raised 3.9 percent.
- Walmart Inc. accounted for approximately 14 percent of consolidated net sales in 2019, 2018 and 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Kimberly-Clark kept $0.12.
- Revenue$18.45B100.0%
- Cost of revenue−$12.41B67.3%
- Gross profit$6.04B32.7%
- Operating costs−$3.04B16.5%
- Operating income$2.99B16.2%
- Interest, other & tax−$834.0M4.5%
- Net income$2.16B11.7%
Where FY2019 revenue went
$18.45B- Cost of revenue: $12.41B, 67% of revenue
- Other operating costs: $2.76B, 15% of revenue
- Net income: $2.16B, 12% of revenue
- R&D: $284.0M, 1.5% of revenue
- Interest, other & tax: $834.0M, 4.5% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 13, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $18.45B$18.49B | −0.2% |
| Cost of Revenue | $12.41B$12.89B | −3.7% |
| Gross Profit | $6.04B$5.60B | +7.8% |
| R&D Expenses | $284.00M$317.00M | −10.4% |
| Operating Income | $2.99B$2.23B | +34.2% |
| Interest Expense | $261.00M$263.00M | −0.8% |
| Net Income | $2.16B$1.41B | +53.0% |
| EPS (Basic) | $6.28$4.05 | +55.1% |
| EPS (Diluted) | $6.24$4.03 | +54.8% |
| Shares Outstanding (Basic) | 343.60M348.00M | −1.3% |
| Shares Outstanding (Diluted) | 345.60M349.60M | −1.1% |
05—Questions
Frequently Asked Questions
Why did reported earnings improve so sharply in 2019?
Reported diluted EPS rose to $6.24 from $4.03 in 2018. The 2018 results included $2.24 per share of charges related to the 2018 Global Restructuring Program and a $0.33 per share charge for U.S. tax reform matters. The 2019 results included net charges of $0.72 per share for restructuring, partly offset by a $0.07 gain on a property sale.
How did the business segments perform in 2019?
Personal Care net sales were $9,108 million, up 1 percent, with operating profit of $1,904 million, up 4 percent. Consumer Tissue net sales were $5,993 million, flat, and operating profit rose 15 percent to $1,007 million on higher net selling prices and cost savings. K-C Professional net sales fell to $3,292 million from $3,382 million, while operating profit rose 4 percent to $657 million.
What is the outlook for the restructuring program and capital spending?
The 2018 Global Restructuring Program is expected to be completed by the end of 2020, with total pre-tax costs of $1.7 billion to $1.9 billion. Restructuring charges in 2020 are expected to be $300 to $500 million pre-tax. Capital spending is expected to be approximately $1.15 billion to $1.35 billion in 2020, including significant restructuring-related spending.
What legal risks does the company disclose?
The company is party to legal proceedings tied to its former health care business, Avanos Medical. In the Bahamas Surgery Center case, a California consumer class action over surgical gowns, the total compensatory and punitive damages plus pre-judgment interest awarded against Kimberly-Clark are approximately $25 million, which the company intends to contest. The company is also responding to a Department of Justice investigation of the former health care business and is in litigation with Avanos over indemnification obligations.
How much debt does the company carry and how is it being managed?
Total debt was $7.7 billion at December 31, 2019, compared with $7.5 billion a year earlier. The company issued $700 million of 3.20% notes due 2029 in April 2019 and $500 million of 2.875% notes due 2050 in February 2020. It maintains a $2.0 billion revolving credit facility expiring in June 2023 and a $750 million facility expiring in June 2020, both currently unused.
06—Continue