01—Abstract
Summary
Summary of the 10-K filed February 11, 2021. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 2020 Annual Report (Form 10-K, filed February 11, 2021) reports net sales of $19.1 billiona, up 4 percent from 2019, with organic sales up 6 percent and currency reducing sales by 2 percent.
Operating profit rose to $3,244 millionb from $2,991 million, and net income attributable to Kimberly-Clark was $2,352 million, or $6.87 diluted earnings per share, versus $6.24 in 2019. Adjusted diluted EPS was $7.74, up 12 percent from $6.89, excluding restructuring charges under the 2018 Global Restructuring Program, Softex Indonesia acquisition costs and a Brazil business tax credit benefit. Results were driven by Consumer Tissue, where net sales rose 12 percent and operating profit rose 44 percent on elevated COVID-19 at-home demand, while K-C Professional net sales fell 8 percent and operating profit fell 20 percent on lower away-from-home demand.
Cash provided by operations was $3.7 billionc in 2020, up from $2.7 billion in 2019, driven by improved working capital and higher earnings. In October 2020 the company acquired Softex Indonesia for approximately $1.2 billion in cash, funded through commercial paper, cash on hand and a $600 million bond. Total debt was $8.4 billion at year-end 2020, compared with $7.7 billion a year earlier.
Share repurchases and dividends totaled $2.15 billiond in 2020, and the Board approved a 6.5 percent dividend increase for 2021 along with a new authorization to repurchase up to 40 million shares, subject to a $5 billion limit. The 2018 Global Restructuring Program's expected annual pre-tax savings were raised to $540 to $560 million by the end of 2021.
The filing identifies COVID-19 as a key risk, citing demand volatility, supply chain disruption and currency and commodity volatility. It also notes exposure to pulp and petroleum-based input costs, which the company generally does not hedge with derivatives, and to foreign market risks, since about half of net sales come from outside the U.S. Deloitte & Touche LLP issued an unqualified opinion on both the financial statements and internal control over financial reporting.
02—Key points
Key Highlights
- Net sales of $19.1 billion increased 4 percent; organic sales increased 6 percent, while currency reduced sales by 2 percent.
- Diluted EPS was $6.87 versus $6.24 in 2019; adjusted diluted EPS was $7.74, up 12 percent.
- Consumer Tissue net sales rose 12 percent to $6,718 million and operating profit rose 44 percent to $1,448 million, driven by COVID-19 at-home demand.
- K-C Professional net sales fell 8 percent to $3,019 million and operating profit fell 20 percent to $528 million on lower away-from-home demand.
- Cash provided by operations was $3.7 billion, up from $2.7 billion, and the company acquired Softex Indonesia for approximately $1.2 billion.
- Total debt rose to $8.4 billion from $7.7 billion; the Board approved a 6.5 percent dividend increase for 2021 and a new repurchase authorization of up to 40 million shares.
- Walmart Inc. accounted for approximately 15 percent of consolidated net sales in 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Kimberly-Clark kept $0.12.
- Revenue$19.14B100.0%
- Cost of revenue−$12.32B64.4%
- Gross profit$6.82B35.6%
- Operating costs−$3.58B18.7%
- Operating income$3.24B16.9%
- Interest, other & tax−$892.0M4.7%
- Net income$2.35B12.3%
Where FY2020 revenue went
$19.14B- Cost of revenue: $12.32B, 64% of revenue
- Other operating costs: $3.30B, 17% of revenue
- Net income: $2.35B, 12% of revenue
- R&D: $276.0M, 1.4% of revenue
- Interest, other & tax: $892.0M, 4.7% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 11, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $19.14B$18.45B | +3.7% |
| Cost of Revenue | $12.32B$12.41B | −0.8% |
| Gross Profit | $6.82B$6.04B | +13.0% |
| R&D Expenses | $276.00M$284.00M | −2.8% |
| Operating Income | $3.24B$2.99B | +8.5% |
| Interest Expense | $252.00M$261.00M | −3.4% |
| Net Income | $2.35B$2.16B | +9.0% |
| EPS (Basic) | $6.90$6.28 | +9.9% |
| EPS (Diluted) | $6.87$6.24 | +10.1% |
| Shares Outstanding (Basic) | 340.70M343.60M | −0.8% |
| Shares Outstanding (Diluted) | 342.50M345.60M | −0.9% |
05—Questions
Frequently Asked Questions
What drove the increase in Kimberly-Clark's 2020 earnings?
Operating profit rose to $3,244 million from $2,991 million. The filing attributes the adjusted operating profit increase of 9 percent to organic sales growth, $455 million of FORCE cost savings, $120 million of savings from the 2018 Global Restructuring Program, and lower input costs driven by pulp. Consumer Tissue was the largest contributor, with operating profit up 44 percent.
How did the COVID-19 pandemic affect the business?
The filing says demand for Consumer Tissue and Personal Care rose in March 2020 as consumers stocked home inventories, and demand for consumer tissue stayed elevated through 2020 as more people spent time at home. K-C Professional experienced volume declines throughout 2020 due to reduced away-from-home demand. The company reported temporary facility closures but no material impact from a plant closure.
What is the Softex Indonesia acquisition and how was it financed?
On October 1, 2020, Kimberly-Clark acquired Softex Indonesia, a personal care business, in an all-cash transaction for approximately $1.2 billion. The company financed it through short-term commercial paper, cash on hand and a $600 million bond issued in September 2020 with a 1.05 percent coupon due 2027. The filing says the acquisition added $390 million of goodwill to the Personal Care segment.
What capital returns did shareholders receive in 2020?
The company paid $1.5 billion in dividends and repurchased 4.9 million shares at a cost of $700 million in 2020, totaling $2.15 billion in combined share repurchases and dividends. The Board approved a 6.5 percent dividend increase for 2021, and targets full-year 2021 share repurchases of $650 million to $750 million.
What are the main risks the filing highlights for investors?
The filing highlights COVID-19 uncertainty, volatility in raw material and energy costs, particularly pulp and petroleum-based materials, and foreign market risks, as about half of net sales come from outside the U.S. It also cites intense competition from private label products, customer concentration with key retailers, and the 2018 Global Restructuring Program's execution risk. The company states it has not used derivatives to manage pulp price risk.
06—Continue