Kimberly-Clark Announces First Quarter 2020 Results
Executive Summary
- First quarter 2020 net sales of
$5.0 billion increased 8 percent compared to the year-ago period, including organic sales growth of 11 percent. - Diluted net income per share for the first quarter was
$1.92 in 2020 and$1.31 in 2019. - First quarter adjusted earnings per share were
$2.13 in 2020, up 28 percent compared to$1.66 in 2019. Adjusted earnings per share exclude certain items described later in this news release. - First quarter cash provided by operations was
$704 million in 2020 and $317 million in 2019. - The company is withdrawing its previous full-year 2020 financial outlook due to the uncertainty related to the COVID-19 pandemic.
Chairman and Chief Executive Officer
Hsu continued, "A combination of increased consumer demand for our products and strong execution by our teams is reflected in our first quarter results. We increased investments in our business and our market positions remain broadly healthy. In addition, we generated very strong cash flow and further strengthened our balance sheet by executing two long-term debt transactions in the quarter. Given the lack of visibility and uncertainty about the pandemic and its potential effects on the global economy and our business, we are temporarily suspending our forward-looking guidance. We expect that we will resume guidance when the environment stabilizes and we can provide a clear picture of our expectations. As always, we are prudently managing our business in the near-term while maintaining focus on the long-term health of our company."
First Quarter 2020 Operating Results
Sales of
First quarter operating profit was
The first quarter effective tax rate was 23.6 percent in 2020 and 24.6 percent in 2019. The first quarter adjusted effective tax rate was 23.2 percent in 2020 and 23.7 percent in 2019.
Cash Flow and Balance Sheet
Cash provided by operations in the first quarter was
First Quarter 2020 Business Segment Results
Personal Care Segment
First quarter sales of
Sales in
Sales in developing and emerging markets increased 3 percent despite a 6 point negative impact from changes in currency rates. Volumes increased 6 percent, product mix improved 3 percent and net selling prices rose 1 percent. Volumes increased in
Sales in developed markets outside
Consumer Tissue Segment
First quarter sales of
Sales in
Sales in developing and emerging markets increased 10 percent despite a 3 point negative impact from changes in currency rates. Volumes increased 12 percent and product mix improved 2 percent, while net selling prices were down 1 percent. Volumes increased in all major geographies.
Sales in developed markets outside
K-C Professional (KCP) Segment
First quarter sales of
Sales in
Sales in developing and emerging markets increased 2 percent despite a 4 point negative impact from changes in currency rates. Volumes and net selling prices each increased 3 percent, while product mix was down 1 percent.
Sales in developed markets outside
2018 Global Restructuring Program
In
As a result of the outbreak of COVID-19 and the related uncertainty and complexity of the environment, the company now expects that some restructuring activity and the related charges will extend into 2021 rather than being completed at the end of 2020 as previously planned. Total restructuring charges to implement the program are expected to be toward the high end of the previously estimated range of
2020 Outlook
The company previously issued its full-year 2020 outlook on
The company is temporarily suspending its share repurchase program effective
Non-GAAP Financial Measures
This news release and the accompanying tables include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the
- Adjusted earnings and earnings per share
- Adjusted gross and operating profit
- Adjusted effective tax rate
These non-GAAP financial measures exclude the following items for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures:
- 2018 Global Restructuring Program. Mentioned elsewhere in this release.
The company provides these non-GAAP financial measures as supplemental information to our GAAP financial measures. Management and the company's Board of Directors use adjusted earnings, adjusted earnings per share and adjusted gross and operating profit to (a) evaluate the company's historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources and (c) measure the operational performance of the company's business units and their managers. Management also believes that the use of an adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
Additionally, the
This news release includes information regarding organic sales growth, which describes the impact of changes in volume, net selling prices and product mix on net sales. Changes in foreign currency exchange rates and exited businesses also impact the year-over-year change in net sales.
Conference Call
A conference call to discuss this news release and other matters of interest to investors and analysts will be held at
About
Copies of
As more fully described in
Certain matters contained in this news release concerning the outlook, anticipated financial and operating results, raw material, energy and other input costs, anticipated currency rates and exchange risks, including in
There can be no assurance that these future events will occur as anticipated or that the company's 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. For a description of certain factors that could cause the company's future results to differ from those expressed in any such forward-looking statements, see Item 1A entitled "Risk Factors" in each of the company's Quarterly Report on Form 10-Q for the quarter ended
|
|||||||
CONSOLIDATED INCOME STATEMENTS |
|||||||
(Millions, except per share amounts) |
|||||||
Three Months Ended |
|||||||
2020 |
2019 |
Change |
|||||
|
$ |
5,009 |
$ |
4,633 |
+8 % |
||
Cost of products sold |
3,218 |
3,205 |
— |
||||
Gross Profit |
1,791 |
1,428 |
+25 % |
||||
Marketing, research and general expenses |
873 |
769 |
+14 % |
||||
Other (income) and expense, net |
14 |
4 |
+250 % |
||||
Operating Profit |
904 |
655 |
+38 % |
||||
Nonoperating expense |
(11) |
(11) |
— |
||||
Interest income |
2 |
3 |
-33 % |
||||
Interest expense |
(61) |
(65) |
-6 % |
||||
Income Before Income Taxes and Equity Interests |
834 |
582 |
+43 % |
||||
Provision for income taxes |
(197) |
(143) |
+38 % |
||||
Income Before Equity Interests |
637 |
439 |
+45 % |
||||
Share of net income of equity companies |
38 |
27 |
+41 % |
||||
Net Income |
675 |
466 |
+45 % |
||||
Net income attributable to noncontrolling interests |
(15) |
(12) |
+25 % |
||||
Net Income Attributable to |
$ |
660 |
$ |
454 |
+45 % |
||
Per Share Basis |
|||||||
Net Income Attributable to |
|||||||
Basic |
$ |
1.93 |
$ |
1.32 |
+46 % |
||
Diluted |
$ |
1.92 |
$ |
1.31 |
+47 % |
||
Cash Dividends Declared |
$ |
1.07 |
$ |
1.03 |
+4 % |
||
Common Shares Outstanding |
|
||||||
2020 |
2019 |
||||||
Outstanding shares as of |
340.8 |
343.9 |
|||||
Average diluted shares for three months ended |
344.1 |
346.0 |
Unaudited |
|
||||||||
NON-GAAP RECONCILIATIONS |
||||||||
(Millions, except per share amounts) |
||||||||
Three Months Ended |
||||||||
As Reported |
2018 Global Restructuring Program |
As Adjusted Non-GAAP |
||||||
Cost of products sold |
$ |
3,218 |
$ |
70 |
$ |
3,148 |
||
Gross Profit |
1,791 |
(70) |
1,861 |
|||||
Marketing, research and general expenses |
873 |
23 |
850 |
|||||
Operating Profit |
904 |
(93) |
997 |
|||||
Provision for income taxes |
(197) |
18 |
(215) |
|||||
Effective tax rate |
23.6 % |
— |
23.2 % |
|||||
Net income attributable to noncontrolling interests |
(15) |
1 |
(16) |
|||||
Net Income Attributable to |
660 |
(74) |
734 |
|||||
Diluted Earnings per Share(a) |
1.92 |
(0.22) |
2.13 |
|||||
Three Months Ended |
||||||||
As Reported |
2018 Global Restructuring Program |
As Adjusted Non-GAAP |
||||||
Cost of products sold |
$ |
3,205 |
$ |
125 |
$ |
3,080 |
||
Gross Profit |
1,428 |
(125) |
1,553 |
|||||
Marketing, research and general expenses |
769 |
28 |
741 |
|||||
Other (income) and expense, net |
4 |
(1) |
5 |
|||||
Operating Profit |
655 |
(152) |
807 |
|||||
Provision for income taxes |
(143) |
31 |
(174) |
|||||
Effective tax rate |
24.6 % |
— |
23.7 % |
|||||
Share of net income of equity companies |
27 |
(2) |
29 |
|||||
Net income attributable to noncontrolling interests |
(12) |
1 |
(13) |
|||||
Net Income Attributable to |
454 |
(122) |
576 |
|||||
Diluted Earnings per Share(a) |
1.31 |
(0.35) |
1.66 |
(a) "As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding. |
|||||||||||||||
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 the company's 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. The company compensates 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. |
|||||||||||||||
Unaudited |
|
|||||
CONSOLIDATED BALANCE SHEETS |
|||||
(Millions) |
|||||
|
|
||||
ASSETS |
|||||
Current Assets |
|||||
Cash and cash equivalents |
$ |
979 |
$ |
442 |
|
Accounts receivable, net |
2,519 |
2,263 |
|||
Inventories |
1,539 |
1,790 |
|||
Other current assets |
609 |
562 |
|||
Total Current Assets |
5,646 |
5,057 |
|||
Property, Plant and Equipment, Net |
7,226 |
7,450 |
|||
Investments in Equity Companies |
314 |
268 |
|||
|
1,361 |
1,467 |
|||
Other Assets |
1,130 |
1,041 |
|||
TOTAL ASSETS |
$ |
15,677 |
$ |
15,283 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
Current Liabilities |
|||||
Debt payable within one year |
$ |
1,238 |
$ |
1,534 |
|
Trade accounts payable |
2,876 |
3,055 |
|||
Accrued expenses and other current liabilities |
2,008 |
1,978 |
|||
Dividends payable |
361 |
352 |
|||
Total Current Liabilities |
6,483 |
6,919 |
|||
Long-Term Debt |
7,210 |
6,213 |
|||
Noncurrent Employee Benefits |
859 |
897 |
|||
Deferred Income Taxes |
512 |
511 |
|||
Other Liabilities |
538 |
520 |
|||
|
29 |
29 |
|||
Stockholders' Equity |
|||||
|
(167) |
(33) |
|||
Noncontrolling Interests |
213 |
227 |
|||
Total Stockholders' Equity |
46 |
194 |
|||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
15,677 |
$ |
15,283 |
2020 Data is Unaudited |
|
|||||
CONSOLIDATED CASH FLOW STATEMENTS |
|||||
(Millions) |
|||||
Three Months Ended |
|||||
2020 |
2019 |
||||
Operating Activities |
|||||
Net income |
$ |
675 |
$ |
466 |
|
Depreciation and amortization |
213 |
234 |
|||
Stock-based compensation |
15 |
16 |
|||
Deferred income taxes |
(9) |
11 |
|||
Net (gains) losses on asset dispositions |
7 |
6 |
|||
Equity companies' earnings (in excess of) less than dividends paid |
(38) |
(27) |
|||
Operating working capital |
(144) |
(375) |
|||
Postretirement benefits |
(14) |
(12) |
|||
Other |
(1) |
(2) |
|||
Cash Provided by Operations |
704 |
317 |
|||
Investing Activities |
|||||
Capital spending |
(352) |
(316) |
|||
Investments in time deposits |
(105) |
(80) |
|||
Maturities of time deposits |
96 |
72 |
|||
Other |
2 |
— |
|||
Cash Used for Investing |
(359) |
(324) |
|||
Financing Activities |
|||||
Cash dividends paid |
(357) |
(345) |
|||
Change in short-term debt |
(282) |
851 |
|||
Debt proceeds |
1,241 |
— |
|||
Debt repayments |
(252) |
(402) |
|||
Proceeds from exercise of stock options |
108 |
26 |
|||
Acquisitions of common stock for the treasury |
(214) |
(164) |
|||
Other |
(24) |
(8) |
|||
Cash Used for Financing |
220 |
(42) |
|||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
(28) |
1 |
|||
Change in Cash and Cash Equivalents |
537 |
(48) |
|||
Cash and Cash Equivalents - Beginning of Period |
442 |
539 |
|||
Cash and Cash Equivalents - End of Period |
$ |
979 |
$ |
491 |
Unaudited |
|
|||||||
SELECTED BUSINESS SEGMENT DATA |
|||||||
(Millions) |
|||||||
Three Months Ended |
|||||||
2020 |
2019 |
Change |
|||||
|
|||||||
Personal Care |
$ |
2,422 |
$ |
2,275 |
+6 % |
||
Consumer Tissue |
1,723 |
1,526 |
+13 % |
||||
K-C Professional |
848 |
817 |
+4 % |
||||
Corporate & Other |
16 |
15 |
N.M. |
||||
TOTAL |
$ |
5,009 |
$ |
4,633 |
+8 % |
||
OPERATING PROFIT |
|||||||
Personal Care |
$ |
527 |
$ |
484 |
+9 % |
||
Consumer Tissue |
365 |
241 |
+51 % |
||||
K-C Professional |
181 |
150 |
+21 % |
||||
Corporate & Other(a) |
(155) |
(216) |
N.M. |
||||
Other (income) and expense, net(a) |
14 |
4 |
+250 % |
||||
TOTAL OPERATING PROFIT |
$ |
904 |
$ |
655 |
+38 % |
(a) |
Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations. |
PERCENTAGE CHANGE IN NET SALES VERSUS PRIOR YEAR |
||||||||||||||
Three Months Ended |
||||||||||||||
Total(a) |
Volume |
Net Price |
Mix/ Other |
Exited Businesses(b) |
Currency |
Organic(c) |
||||||||
Personal Care |
6 |
7 |
1 |
2 |
— |
(3) |
9 |
|||||||
Consumer Tissue |
13 |
14 |
1 |
— |
— |
(2) |
14 |
|||||||
K-C Professional |
4 |
4 |
2 |
1 |
(1) |
(2) |
7 |
|||||||
TOTAL CONSOLIDATED |
8 |
8 |
1 |
1 |
— |
(2) |
11 |
(a) |
Total may not equal the sum of volume, net price, mix/other, exited businesses and currency due to rounding. |
(b) |
Exited businesses in conjunction with the 2018 Global Restructuring Program. |
(c) |
Combined impact of changes in volume, net price and mix/other. |
N.M. - Not Meaningful |
|
Unaudited |
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SOURCE
Investor Relations contact: Paul Alexander, 972-281-1440, palexand@kcc.com, or Media Relations contact: Terry Balluck, 972-281-1397, terry.balluck@kcc.com