Kimberly-Clark Announces Second Quarter 2018 Results
Executive Summary
- Second quarter 2018 net sales of
$4.6 billion increased 1 percent compared to the year-ago period. Changes in foreign currency exchange rates benefited sales by 1 percent while organic sales were even year-on-year. - Diluted net income per share for the second quarter of 2018 was
$1.30 . Second quarter adjusted earnings per share were$1.59 in 2018, an increase of 7 percent compared to diluted net income per share of$1.49 in 2017. Adjusted earnings per share exclude certain items described later in this news release. - Diluted net income per share for 2018 is anticipated to be
$3.37 to $3.87 . - The company is now targeting full-year 2018 adjusted earnings per share of
$6.60 to $6.80 , a year-on-year increase of 6 to 9 percent. The company's prior target was$6.90 to $7.20 . The update reflects higher commodity inflation along with a worse currency outlook, partially offset by increased cost savings and reduced overhead spending.
Chairman and Chief Executive Officer
Falk added, "For the full year, we are maintaining our organic sales growth target and reducing our earnings outlook because of significantly higher commodity costs and the recent weakening of most foreign currencies. Given these headwinds, we will continue to aggressively manage costs and evaluate further opportunities to increase net selling prices. While the near-term environment has become more difficult, we continue to execute our long-term strategies to grow our brands and deliver cost savings while we implement our restructuring that will make
Second Quarter 2018 Operating Results
Sales of
Second quarter operating profit was
The second quarter effective tax rate was 24.1 percent in 2018. The adjusted effective tax rate was 23.0 percent in the second quarter of 2018 compared to the effective tax rate of 28.2 percent in the second quarter of 2017. The comparison benefited from U.S. tax reform, along with resolution of certain tax matters.
Cash Flow and Balance Sheet
Cash provided by operations in the second quarter was
Second Quarter 2018 Business Segment Results
Personal Care Segment
Second quarter sales of
Sales in
Sales in developing and emerging markets decreased 1 percent. Currency rates were unfavorable by 2 percent while the acquisition of the company's joint venture in
Sales in developed markets outside
Consumer Tissue Segment
Second quarter sales of
Sales in
Sales in developing and emerging markets were even year-on-year. Net selling prices increased 2 percent and product mix was up 1 percent, while volumes fell 3 percent. The changes in net selling prices and volumes occurred primarily in
Sales in developed markets outside
K-C Professional (KCP) Segment
Second quarter sales of
Sales in
Sales in developing and emerging markets increased 3 percent. Volumes were up 2 percent, driven by
Sales in developed markets outside
Year-To-Date Results
For the first six months of 2018, sales of
Year-to-date operating profit was
Through six months, diluted net income per share was
2018 Global Restructuring Program
In
The company expects the program will generate annual pre-tax cost savings of
Second quarter 2018 restructuring charges were
2018 Outlook and Key Planning Assumptions
The company updated the following key planning and guidance assumptions for full-year 2018:
- Net sales similar, to up 1 percent, year-on-year (prior assumption increase of 2 to 3 percent).
- Changes in foreign currency exchange rates anticipated to have a neutral to 1 percent negative impact on net sales (previous estimate 1 to 2 percent positive impact).
- Organic sales expected to increase approximately 1 percent (no change).
- Adjusted operating profit decline of 2 to 5 percent (prior estimate growth of 2 to 5 percent).
- Inflation in key cost inputs of
$675 to $775 million compared to the previous estimate of$400 to $550 million . The update reflects higher assumptions for pulp costs in particular, and secondarily other raw materials. InNorth America , the company is assuming full-year market prices of$1,200 to $1,250 per metric ton for eucalyptus pulp and high-$60 's per barrel for oil. - Cost savings of
$425 to $450 million from the FORCE program. The prior target was for savings of approximately$400 million . - Cost savings of
$100 to $120 million from the 2018 Global Restructuring Program. The previous estimate was for savings of$50 to $70 million . - Adjusted effective tax rate expected to be at the low end of the 23 to 26 percent target range.
- Adjusted earnings per share of
$6.60 to $6.80 . The prior estimate was$6.90 to $7.20 .
Non-GAAP Financial Measures
This press release and the accompanying tables include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures:
- 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.
- U.S. tax reform. In the fourth quarter of 2017, the company recognized a net benefit as a result of U.S. tax reform and related activities. In the first quarter of 2018, the company recognized a net charge associated with U.S. tax reform related matters.
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 acquisitions and divestitures 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
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 of the company's Annual Report on Form 10-K for the year ended
KIMBERLY-CLARK CORPORATION |
||||||||||
CONSOLIDATED INCOME STATEMENT |
||||||||||
(Millions, except per share amounts) |
||||||||||
Three Months Ended June 30 |
||||||||||
2018 |
2017 |
Change |
||||||||
Net Sales |
$ |
4,604 |
$ |
4,576 |
+1 |
% |
||||
Cost of products sold |
3,149 |
2,924 |
+8 |
% |
||||||
Gross Profit |
1,455 |
1,652 |
-12 |
% |
||||||
Marketing, research and general expenses |
771 |
835 |
-8 |
% |
||||||
Other (income) and expense, net |
10 |
3 |
+233 |
% |
||||||
Operating Profit |
674 |
814 |
-17 |
% |
||||||
Nonoperating expense |
(36) |
(15) |
+140 |
% |
||||||
Interest income |
3 |
2 |
+50 |
% |
||||||
Interest expense |
(68) |
(85) |
-20 |
% |
||||||
Income Before Income Taxes and Equity Interests |
573 |
716 |
-20 |
% |
||||||
Provision for income taxes |
(138) |
(202) |
-32 |
% |
||||||
Income Before Equity Interests |
435 |
514 |
-15 |
% |
||||||
Share of net income of equity companies |
30 |
26 |
+15 |
% |
||||||
Net Income |
465 |
540 |
-14 |
% |
||||||
Net income attributable to noncontrolling interests |
(10) |
(9) |
+11 |
% |
||||||
Net Income Attributable to Kimberly-Clark Corporation |
$ |
455 |
$ |
531 |
-14 |
% |
||||
Per Share Basis |
||||||||||
Net Income Attributable to Kimberly-Clark Corporation |
||||||||||
Basic |
$ |
1.30 |
$ |
1.50 |
-13 |
% |
||||
Diluted |
$ |
1.30 |
$ |
1.49 |
-13 |
% |
||||
Cash Dividends Declared |
$ |
1.00 |
$ |
0.97 |
+3 |
% |
||||
Common Shares Outstanding |
June 30 |
|||||||||
2018 |
2017 |
|||||||||
Outstanding shares as of |
347.9 |
353.4 |
||||||||
Average diluted shares for three months ended |
350.3 |
356.7 |
||||||||
N.M. - Not Meaningful |
Unaudited |
KIMBERLY-CLARK CORPORATION |
||||||||||
CONSOLIDATED INCOME STATEMENT |
||||||||||
(Millions, except per share amounts) |
||||||||||
Six Months Ended June 30 |
||||||||||
2018 |
2017 |
Change |
||||||||
Net Sales |
$ |
9,335 |
$ |
9,080 |
+3 |
% |
||||
Cost of products sold |
6,556 |
5,768 |
+14 |
% |
||||||
Gross Profit |
2,779 |
3,312 |
-16 |
% |
||||||
Marketing, research and general expenses |
1,850 |
1,642 |
+13 |
% |
||||||
Other (income) and expense, net |
8 |
8 |
— |
|||||||
Operating Profit |
921 |
1,662 |
-45 |
% |
||||||
Nonoperating expense |
(45) |
(29) |
+55 |
% |
||||||
Interest income |
5 |
4 |
+25 |
% |
||||||
Interest expense |
(134) |
(168) |
-20 |
% |
||||||
Income Before Income Taxes and Equity Interests |
747 |
1,469 |
-49 |
% |
||||||
Provision for income taxes |
(242) |
(409) |
-41 |
% |
||||||
Income Before Equity Interests |
505 |
1,060 |
-52 |
% |
||||||
Share of net income of equity companies |
57 |
55 |
+4 |
% |
||||||
Net Income |
562 |
1,115 |
-50 |
% |
||||||
Net income attributable to noncontrolling interests |
(14) |
(21) |
-33 |
% |
||||||
Net Income Attributable to Kimberly-Clark Corporation |
$ |
548 |
$ |
1,094 |
-50 |
% |
||||
Per Share Basis |
||||||||||
Net Income Attributable to Kimberly-Clark Corporation |
||||||||||
Basic |
$ |
1.57 |
$ |
3.08 |
-49 |
% |
||||
Diluted |
$ |
1.56 |
$ |
3.06 |
-49 |
% |
||||
Cash Dividends Declared |
$ |
2.00 |
$ |
1.94 |
+3 |
% |
||||
Common Shares Outstanding |
June 30 |
|||||||||
2018 |
2017 |
|||||||||
Average diluted shares for six months ended |
351.3 |
357.6 |
||||||||
N.M. - Not Meaningful |
Unaudited |
KIMBERLY-CLARK CORPORATION |
|||||||||||||||||
NON-GAAP RECONCILIATIONS |
|||||||||||||||||
(Millions, except per share amounts) |
|||||||||||||||||
Three Months Ended June 30, 2018 |
|||||||||||||||||
As Reported |
2018 Global Restructuring Program |
As Adjusted Non-GAAP |
|||||||||||||||
Cost of products sold |
$ |
3,149 |
$ |
85 |
$ |
3,064 |
|||||||||||
Gross Profit |
1,455 |
(85) |
1,540 |
||||||||||||||
Marketing, research and general expenses |
771 |
15 |
756 |
||||||||||||||
Operating Profit |
674 |
(100) |
774 |
||||||||||||||
Nonoperating expense |
(36) |
(30) |
(6) |
||||||||||||||
Provision for income taxes |
(138) |
24 |
(162) |
||||||||||||||
Effective tax rate |
24.1 |
% |
— |
23.0 |
% |
||||||||||||
Share of net income of equity companies |
30 |
2 |
28 |
||||||||||||||
Net income attributable to noncontrolling interests |
(10) |
2 |
(12) |
||||||||||||||
Net Income Attributable to Kimberly-Clark Corporation |
455 |
(102) |
557 |
||||||||||||||
Diluted Earnings per Share |
1.30 |
(0.29) |
1.59 |
||||||||||||||
Six Months Ended June 30, 2018 |
|||||||||||||||||
As Reported |
2018 Global Restructuring Program |
U.S. Tax Reform Related Matters |
As Adjusted Non-GAAP |
||||||||||||||
Cost of products sold |
$ |
6,556 |
$ |
362 |
$ |
— |
$ |
6,194 |
|||||||||
Gross Profit |
2,779 |
(362) |
— |
3,141 |
|||||||||||||
Marketing, research and general expenses |
1,850 |
315 |
— |
1,535 |
|||||||||||||
Operating Profit |
921 |
(677) |
— |
1,598 |
|||||||||||||
Nonoperating expense |
(45) |
(30) |
— |
(15) |
|||||||||||||
Provision for income taxes |
(242) |
167 |
(82) |
(327) |
|||||||||||||
Effective tax rate |
32.4 |
% |
— |
— |
22.5 |
% |
|||||||||||
Share of net income of equity companies |
57 |
(1) |
— |
58 |
|||||||||||||
Net income attributable to noncontrolling interests |
(14) |
11 |
— |
(25) |
|||||||||||||
Net Income Attributable to Kimberly-Clark Corporation |
548 |
(530) |
(82) |
1,160 |
|||||||||||||
Diluted Earnings per Share |
1.56 |
(1.51) |
(0.23) |
3.30 |
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 |
KIMBERLY-CLARK CORPORATION |
|||||||
CONSOLIDATED BALANCE SHEET |
|||||||
(Millions) |
|||||||
June 30, 2018 |
December 31, 2017 |
||||||
ASSETS |
|||||||
Current Assets |
|||||||
Cash and cash equivalents |
$ |
484 |
$ |
616 |
|||
Accounts receivable, net |
2,286 |
2,315 |
|||||
Inventories |
1,750 |
1,790 |
|||||
Other current assets |
508 |
490 |
|||||
Total Current Assets |
5,028 |
5,211 |
|||||
Property, Plant and Equipment, Net |
7,046 |
7,436 |
|||||
Investments in Equity Companies |
257 |
233 |
|||||
Goodwill |
1,504 |
1,576 |
|||||
Other Assets |
729 |
695 |
|||||
TOTAL ASSETS |
$ |
14,564 |
$ |
15,151 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current Liabilities |
|||||||
Debt payable within one year |
$ |
1,741 |
$ |
953 |
|||
Trade accounts payable |
2,802 |
2,834 |
|||||
Accrued expenses |
1,764 |
1,730 |
|||||
Dividends payable |
348 |
341 |
|||||
Total Current Liabilities |
6,655 |
5,858 |
|||||
Long-Term Debt |
5,746 |
6,472 |
|||||
Noncurrent Employee Benefits |
1,091 |
1,184 |
|||||
Deferred Income Taxes |
467 |
395 |
|||||
Other Liabilities |
366 |
299 |
|||||
Redeemable Preferred Securities of Subsidiaries |
61 |
61 |
|||||
Stockholders' Equity (Deficit) |
|||||||
Kimberly-Clark Corporation |
(57) |
629 |
|||||
Noncontrolling Interests |
235 |
253 |
|||||
Total Stockholders' Equity |
178 |
882 |
|||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
14,564 |
$ |
15,151 |
2018 Data is Unaudited |
KIMBERLY-CLARK CORPORATION |
|||||||||||||||
CONSOLIDATED CASH FLOW STATEMENT |
|||||||||||||||
(Millions) |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||
Operating Activities |
|||||||||||||||
Net income |
$ |
465 |
$ |
540 |
$ |
562 |
$ |
1,115 |
|||||||
Depreciation and amortization |
224 |
180 |
435 |
358 |
|||||||||||
Asset impairments |
— |
— |
74 |
— |
|||||||||||
Stock-based compensation |
8 |
30 |
26 |
50 |
|||||||||||
Deferred income taxes |
44 |
(9) |
17 |
(34) |
|||||||||||
Net losses on asset dispositions |
17 |
5 |
53 |
10 |
|||||||||||
Equity companies' earnings (in excess of) less than dividends paid |
2 |
4 |
(25) |
(22) |
|||||||||||
Operating working capital |
(10) |
73 |
93 |
(191) |
|||||||||||
Postretirement benefits |
27 |
13 |
(14) |
(8) |
|||||||||||
Other |
10 |
(11) |
108 |
(17) |
|||||||||||
Cash Provided by Operations |
787 |
825 |
1,329 |
1,261 |
|||||||||||
Investing Activities |
|||||||||||||||
Capital spending |
(158) |
(171) |
(347) |
(386) |
|||||||||||
Investments in time deposits |
(64) |
(24) |
(147) |
(61) |
|||||||||||
Maturities of time deposits |
75 |
— |
94 |
70 |
|||||||||||
Other |
(9) |
(14) |
(12) |
(10) |
|||||||||||
Cash Used for Investing |
(156) |
(209) |
(412) |
(387) |
|||||||||||
Financing Activities |
|||||||||||||||
Cash dividends paid |
(350) |
(345) |
(691) |
(674) |
|||||||||||
Change in short-term debt |
(145) |
(82) |
104 |
114 |
|||||||||||
Debt proceeds |
— |
344 |
— |
344 |
|||||||||||
Debt repayments |
(2) |
(4) |
(4) |
(12) |
|||||||||||
Proceeds from exercise of stock options |
8 |
29 |
22 |
107 |
|||||||||||
Acquisitions of common stock for the treasury |
(223) |
(302) |
(420) |
(597) |
|||||||||||
Other |
(35) |
(37) |
(41) |
(46) |
|||||||||||
Cash Used for Financing |
(747) |
(397) |
(1,030) |
(764) |
|||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
(26) |
(3) |
(19) |
18 |
|||||||||||
Change in Cash and Cash Equivalents |
(142) |
216 |
(132) |
128 |
|||||||||||
Cash and Cash Equivalents - Beginning of Period |
626 |
835 |
616 |
923 |
|||||||||||
Cash and Cash Equivalents - End of Period |
$ |
484 |
$ |
1,051 |
$ |
484 |
$ |
1,051 |
Unaudited |
KIMBERLY-CLARK CORPORATION |
||||||||||||||||||||||
SELECTED BUSINESS SEGMENT DATA |
||||||||||||||||||||||
(Millions) |
||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
|||||||||||||||||
NET SALES |
||||||||||||||||||||||
Personal Care |
$ |
2,257 |
$ |
2,270 |
-1 |
% |
$ |
4,564 |
$ |
4,520 |
+1 |
% |
||||||||||
Consumer Tissue |
1,472 |
1,463 |
+1 |
% |
3,051 |
2,918 |
+5 |
% |
||||||||||||||
K-C Professional |
861 |
832 |
+3 |
% |
1,693 |
1,621 |
+4 |
% |
||||||||||||||
Corporate & Other |
14 |
11 |
N.M. |
27 |
21 |
N.M. |
||||||||||||||||
TOTAL NET SALES |
$ |
4,604 |
$ |
4,576 |
+1 |
% |
$ |
9,335 |
$ |
9,080 |
+3 |
% |
||||||||||
OPERATING PROFIT |
||||||||||||||||||||||
Personal Care |
$ |
461 |
$ |
474 |
-3 |
% |
$ |
931 |
$ |
961 |
-3 |
% |
||||||||||
Consumer Tissue |
207 |
245 |
-16 |
% |
456 |
525 |
-13 |
% |
||||||||||||||
K-C Professional |
165 |
166 |
-1 |
% |
323 |
315 |
+3 |
% |
||||||||||||||
Corporate & Other(a) |
(149) |
(68) |
N.M. |
(781) |
(131) |
N.M. |
||||||||||||||||
Other (income) and expense, net(a) |
10 |
3 |
+233 |
% |
8 |
8 |
— |
|||||||||||||||
TOTAL OPERATING PROFIT |
$ |
674 |
$ |
814 |
-17 |
% |
$ |
921 |
$ |
1,662 |
-45 |
% |
(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 June 30, 2018 |
||||||||||||||||||||
Total(a) |
Volume |
Net Price |
Mix/ Other |
Acquisition |
Currency |
Organic(b) |
||||||||||||||
Personal Care |
(1) |
— |
(2) |
1 |
— |
— |
(1) |
|||||||||||||
Consumer Tissue |
1 |
(3) |
2 |
1 |
— |
2 |
(1) |
|||||||||||||
K-C Professional |
3 |
1 |
— |
1 |
— |
2 |
2 |
|||||||||||||
TOTAL CONSOLIDATED |
1 |
(1) |
(1) |
1 |
— |
1 |
— |
|||||||||||||
Six Months Ended June 30, 2018 |
||||||||||||||||||||
Total(a) |
Volume |
Net Price |
Mix/ Other |
Acquisition |
Currency |
Organic(b) |
||||||||||||||
Personal Care |
1 |
1 |
(2) |
1 |
1 |
1 |
— |
|||||||||||||
Consumer Tissue |
5 |
2 |
1 |
— |
— |
2 |
2 |
|||||||||||||
K-C Professional |
4 |
1 |
— |
1 |
— |
2 |
2 |
|||||||||||||
TOTAL CONSOLIDATED |
3 |
1 |
(1) |
— |
— |
2 |
1 |
(a) |
Total may not equal the sum of volume, net price, mix/other, acquisition and currency due to rounding. |
|||||||||||||||||
(b) |
Combined impact of changes in volume, net price and mix/other. |
|||||||||||||||||
N.M. - Not Meaningful |
||||||||||||||||||
Unaudited |
KIMBERLY-CLARK CORPORATION |
||||||||||
NON-GAAP RECONCILIATIONS |
||||||||||
Estimated Range |
||||||||||
ESTIMATED FULL YEAR 2018 DILUTED EARNINGS PER SHARE |
||||||||||
Adjusted earnings per share |
$ |
6.60 |
- |
$ |
6.80 |
|||||
Adjustment for charges related to the 2018 Global Restructuring Program |
(3.00) |
- |
(2.70) |
|||||||
Adjustment for net charge associated with U.S. Tax Reform Related Matters |
(0.23) |
- |
(0.23) |
|||||||
Per share basis – diluted net income attributable to Kimberly-Clark Corporation |
$ |
3.37 |
- |
$ |
3.87 |
|||||
ESTIMATED FULL YEAR 2018 EFFECTIVE TAX RATE |
||||||||||
Adjusted effective tax rate |
23 |
% |
- |
26 |
% |
|||||
Adjustment for charges related to the 2018 Global Restructuring Program |
1 |
- |
1 |
|||||||
Adjustment for net charge associated with U.S. Tax Reform Related Matters |
4 |
- |
4 |
|||||||
Effective tax rate |
28 |
% |
- |
31 |
% |
Twelve months ended |
||||
FULL YEAR 2017 DILUTED EARNINGS PER SHARE |
||||
Adjusted earnings per share |
$ |
6.23 |
||
Adjustment for net benefit associated with U.S. Tax Reform Related Matters |
0.17 |
|||
Per share basis – diluted net income attributable to Kimberly-Clark Corporation |
$ |
6.40 |
[KMB-F]
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SOURCE
Investor Relations contact: Paul Alexander, 972-281-1440, palexand@kcc.com OR Media Relations contact: Terry Balluck, 972-281-1481, terry.balluck@kcc.com