Kimberly-Clark Announces Third Quarter 2020 Results
Executive Summary
- Third quarter 2020 net sales of
$4.7 billion increased 1 percent compared to the year-ago period, including organic sales growth of 3 percent. - Diluted net income per share for the third quarter was
$1.38 in 2020 and$1.94 in 2019. - Third quarter adjusted earnings per share were
$1.72 in 2020 compared to$1.84 in 2019. Adjusted earnings per share exclude certain items described later in this news release. - Diluted net income per share for 2020 is expected to be
$6.41 to$6.72 . - The company is now targeting full-year 2020 organic net sales growth of 5 percent and adjusted earnings per share of
$7.50 to$7.65 . The prior outlook was for organic sales growth of 4 to 5 percent and adjusted earnings per share of$7.40 to$7.60 .
Chairman and Chief Executive Officer
Hsu continued, "We delivered solid organic sales growth in the third quarter, with good underlying performance and increased demand because of COVID-19. We also achieved
Third Quarter 2020 Operating Results
Sales of
Third quarter operating profit was
Third quarter adjusted operating profit was
The third quarter effective tax rate was 20.1 percent in 2020 and 22.8 percent in 2019. The third quarter adjusted effective tax rate was 22.4 percent in 2020 and 21.5 percent in 2019.
Cash Flow and Balance Sheet
Cash provided by operations in the third quarter was
Third Quarter 2020 Business Segment Results
Personal Care Segment
Third quarter sales of
Sales in
Sales in developing and emerging markets decreased 4 percent. Changes in currency rates reduced sales 11 percent. Volumes rose 5 percent, including increases in
Sales in developed markets outside
Consumer Tissue Segment
Third quarter sales of
Sales in
Sales in developing and emerging markets decreased 4 percent including a 7 point negative impact from changes in currency rates. Volumes rose 3 percent and product mix improved 2 percent, while net selling prices fell 2 percent.
Sales in developed markets outside
K-C Professional (KCP) Segment
Third quarter sales of
Sales in
Sales in developing and emerging markets decreased 28 percent including a 5 point negative impact from changes in currency rates. Volumes fell 24 percent, with significant declines in all major geographies, and product mix was down 2 percent. Net selling prices increased 3 percent.
Sales in developed markets outside
Year-To-Date Results
For the first nine months of 2020, sales of
Year-to-date operating profit was
Through nine months, diluted net income per share was
2018 Global Restructuring Program
In
The restructuring is expected to be completed in 2021, with total restructuring charges anticipated to be toward the high end of the range of
2020 Outlook and Key Planning Assumptions
The company's outlook continues to assume no significant impact from potential supply chain disruptions as a result of COVID-19. In addition, the company updated the following key planning and guidance assumptions for full-year 2020:
- Net sales increase of 2 to 3 percent (prior assumption 1 to 2 percent).
- Organic sales increase of 5 percent compared to the previous target of 4 to 5 percent.
- Foreign currency exchange rates unfavorable between 2 and 3 percent (prior estimate 3 percent).
- The net impact of the acquisition of Softex Indonesia and exited businesses in conjunction with the 2018 Global Restructuring Program expected to increase sales slightly.
- Adjusted operating profit growth of 8 to 10 percent (prior estimate 6 to 9 percent).
- Adjusted earnings per share of
$7.50 to$7.65 compared to the prior outlook of$7.40 to$7.60 and$6.89 in 2019.
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.
- Softex Indonesia acquisition-related costs. The company incurred costs to evaluate and execute the acquisition of Softex Indonesia.
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, exited businesses and acquisitions 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 |
|||||
|
$ |
4,683 |
$ |
4,640 |
+1 % |
||
Cost of products sold |
3,093 |
3,085 |
— |
||||
Gross Profit |
1,590 |
1,555 |
+2 % |
||||
Marketing, research and general expenses |
919 |
815 |
+13 % |
||||
Other (income) and expense, net |
5 |
(175) |
N.M. |
||||
Operating Profit |
666 |
915 |
-27 % |
||||
Nonoperating expense |
(40) |
(11) |
+264 % |
||||
Interest income |
2 |
3 |
-33 % |
||||
Interest expense |
(62) |
(66) |
-6 % |
||||
Income Before Income Taxes and Equity Interests |
566 |
841 |
-33 % |
||||
Provision for income taxes |
(114) |
(192) |
-41 % |
||||
Income Before Equity Interests |
452 |
649 |
-30 % |
||||
Share of net income of equity companies |
31 |
31 |
— |
||||
Net Income |
483 |
680 |
-29 % |
||||
Net income attributable to noncontrolling interests |
(11) |
(9) |
+22 % |
||||
Net Income Attributable to |
$ |
472 |
$ |
671 |
-30 % |
||
Per Share Basis |
|||||||
Net Income Attributable to |
|||||||
Basic |
$ |
1.38 |
$ |
1.95 |
-29 % |
||
Diluted |
$ |
1.38 |
$ |
1.94 |
-29 % |
||
Cash Dividends Declared |
$ |
1.07 |
$ |
1.03 |
+4 % |
||
Common Shares Outstanding |
|
||||||
2020 |
2019 |
||||||
Outstanding shares as of |
340.4 |
343.1 |
|||||
Average diluted shares for three months ended |
342.3 |
345.9 |
Unaudited |
|
|||||||
CONSOLIDATED INCOME STATEMENTS |
|||||||
(Millions, except per share amounts) |
|||||||
Nine Months Ended |
|||||||
2020 |
2019 |
Change |
|||||
|
$ |
14,304 |
$ |
13,867 |
+3 % |
||
Cost of products sold |
9,146 |
9,398 |
-3 % |
||||
Gross Profit |
5,158 |
4,469 |
+15 % |
||||
Marketing, research and general expenses |
2,636 |
2,395 |
+10 % |
||||
Other (income) and expense, net |
27 |
(166) |
N.M. |
||||
Operating Profit |
2,495 |
2,240 |
+11 % |
||||
Nonoperating expense |
(57) |
(33) |
+73 % |
||||
Interest income |
6 |
8 |
-25 % |
||||
Interest expense |
(188) |
(198) |
-5 % |
||||
Income Before Income Taxes and Equity Interests |
2,256 |
2,017 |
+12 % |
||||
Provision for income taxes |
(510) |
(467) |
+9 % |
||||
Income Before Equity Interests |
1,746 |
1,550 |
+13 % |
||||
Share of net income of equity companies |
104 |
91 |
+14 % |
||||
Net Income |
1,850 |
1,641 |
+13 % |
||||
Net income attributable to noncontrolling interests |
(37) |
(31) |
+19 % |
||||
Net Income Attributable to |
$ |
1,813 |
$ |
1,610 |
+13 % |
||
Per Share Basis |
|||||||
Net Income Attributable to |
|||||||
Basic |
$ |
5.32 |
$ |
4.68 |
+14 % |
||
Diluted |
$ |
5.30 |
$ |
4.65 |
+14 % |
||
Cash Dividends Declared |
$ |
3.21 |
$ |
3.09 |
+4 % |
||
Common Shares Outstanding |
|
||||||
2020 |
2019 |
||||||
Average diluted shares for nine months ended |
342.3 |
346.0 |
Unaudited |
|
|||||||||||
NON-GAAP RECONCILIATIONS |
|||||||||||
(Millions, except per share amounts) |
|||||||||||
Three Months Ended |
|||||||||||
As Reported |
2018 Global Restructuring Program |
Softex Acquisition- Related Costs |
As Adjusted Non-GAAP |
||||||||
Cost of products sold |
$ |
3,093 |
$ |
107 |
$ |
— |
$ |
2,986 |
|||
Gross Profit |
1,590 |
(107) |
— |
1,697 |
|||||||
Marketing, research and general expenses |
919 |
25 |
9 |
885 |
|||||||
Other (income) and expense, net |
5 |
(1) |
— |
6 |
|||||||
Operating Profit |
666 |
(131) |
(9) |
806 |
|||||||
Nonoperating expense |
(40) |
(26) |
— |
(14) |
|||||||
Provision for income taxes |
(114) |
50 |
— |
(164) |
|||||||
Effective tax rate |
20.1 % |
— |
— |
22.4 % |
|||||||
Share of net income of equity companies |
31 |
— |
— |
31 |
|||||||
Net income attributable to noncontrolling interests |
(11) |
— |
— |
(11) |
|||||||
Net Income Attributable to |
472 |
(107) |
(9) |
588 |
|||||||
Diluted Earnings per Share(a) |
1.38 |
(0.31) |
(0.03) |
1.72 |
|||||||
Three Months Ended |
|||||||||||
As Reported |
2018 Global Restructuring Program |
As Adjusted Non-GAAP |
|||||||||
Cost of products sold |
$ |
3,085 |
$ |
104 |
$ |
2,981 |
|||||
Gross Profit |
1,555 |
(104) |
1,659 |
||||||||
Marketing, research and general expenses |
815 |
21 |
794 |
||||||||
Other (income) and expense, net(b) |
(175) |
(181) |
6 |
||||||||
Operating Profit |
915 |
56 |
859 |
||||||||
Provision for income taxes |
(192) |
(23) |
(169) |
||||||||
Effective tax rate |
22.8 % |
— |
21.5 % |
||||||||
Net Income Attributable to |
671 |
33 |
638 |
||||||||
Diluted Earnings per Share(a) |
1.94 |
0.10 |
1.84 |
(a) |
"As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding. |
(b) |
Other (income) and expense, net includes a pre-tax gain of approximately |
Unaudited |
|
||||||||||||||
NON-GAAP RECONCILIATIONS |
||||||||||||||
(Millions, except per share amounts) |
||||||||||||||
Nine Months Ended |
||||||||||||||
As Reported |
2018 Global Restructuring Program |
Softex Acquisition- Related Costs |
As Adjusted Non-GAAP |
|||||||||||
Cost of products sold |
$ |
9,146 |
$ |
237 |
$ |
— |
$ |
8,909 |
||||||
Gross Profit |
5,158 |
(237) |
— |
5,395 |
||||||||||
Marketing, research and general expenses |
2,636 |
75 |
9 |
2,552 |
||||||||||
Other (income) and expense, net |
27 |
(1) |
— |
28 |
||||||||||
Operating Profit |
2,495 |
(311) |
(9) |
2,815 |
||||||||||
Nonoperating expense |
(57) |
(26) |
— |
(31) |
||||||||||
Provision for income taxes |
(510) |
83 |
— |
(593) |
||||||||||
Effective tax rate |
22.6 % |
— |
— |
22.8 % |
||||||||||
Share of net income of equity companies |
104 |
(1) |
— |
105 |
||||||||||
Net income attributable to noncontrolling interests |
(37) |
2 |
— |
(39) |
||||||||||
Net Income Attributable to |
1,813 |
(253) |
(9) |
2,075 |
||||||||||
Diluted Earnings per Share(a) |
5.30 |
(0.74) |
(0.03) |
6.06 |
||||||||||
Nine Months Ended |
||||||||||||||
As Reported |
2018 Global Restructuring Program |
As Adjusted Non-GAAP |
||||||||||||
Cost of products sold |
$ |
9,398 |
$ |
331 |
$ |
9,067 |
||||||||
Gross Profit |
4,469 |
(331) |
4,800 |
|||||||||||
Marketing, research and general expenses |
2,395 |
66 |
2,329 |
|||||||||||
Other (income) and expense, net(b) |
(166) |
(182) |
16 |
|||||||||||
Operating Profit |
2,240 |
(215) |
2,455 |
|||||||||||
Provision for income taxes |
(467) |
35 |
(502) |
|||||||||||
Effective tax rate |
23.2 % |
— |
22.5 % |
|||||||||||
Share of net income of equity companies |
91 |
(2) |
93 |
|||||||||||
Net income attributable to noncontrolling interests |
(31) |
1 |
(32) |
|||||||||||
Net Income Attributable to |
1,610 |
(181) |
1,791 |
|||||||||||
Diluted Earnings per Share(a) |
4.65 |
(0.52) |
5.18 |
(a) |
"As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding. |
(b) |
Other (income) and expense, net includes a pre-tax gain of approximately |
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 |
$ |
1,518 |
$ |
442 |
|
Accounts receivable, net |
2,125 |
2,263 |
|||
Inventories |
1,787 |
1,790 |
|||
Other current assets |
645 |
562 |
|||
Total Current Assets |
6,075 |
5,057 |
|||
Property, Plant and Equipment, Net |
7,497 |
7,450 |
|||
Investments in Equity Companies |
333 |
268 |
|||
|
1,418 |
1,467 |
|||
Other Assets |
1,208 |
1,041 |
|||
TOTAL ASSETS |
$ |
16,531 |
$ |
15,283 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
Current Liabilities |
|||||
Debt payable within one year |
$ |
517 |
$ |
1,534 |
|
Trade accounts payable |
2,995 |
3,055 |
|||
Accrued expenses and other current liabilities |
2,230 |
1,978 |
|||
Dividends payable |
360 |
352 |
|||
Total Current Liabilities |
6,102 |
6,919 |
|||
Long-Term Debt |
7,851 |
6,213 |
|||
Noncurrent Employee Benefits |
873 |
897 |
|||
Deferred Income Taxes |
500 |
511 |
|||
Other Liabilities |
599 |
520 |
|||
|
29 |
29 |
|||
Stockholders' Equity |
|||||
|
335 |
(33) |
|||
Noncontrolling Interests |
242 |
227 |
|||
Total Stockholders' Equity |
577 |
194 |
|||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
16,531 |
$ |
15,283 |
2020 Data is Unaudited |
|
|||||||||||
CONSOLIDATED CASH FLOW STATEMENTS |
|||||||||||
(Millions) |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||
Operating Activities |
|||||||||||
Net income |
$ |
483 |
$ |
680 |
$ |
1,850 |
$ |
1,641 |
|||
Depreciation and amortization |
192 |
230 |
606 |
700 |
|||||||
Stock-based compensation |
47 |
26 |
101 |
74 |
|||||||
Deferred income taxes |
(42) |
(18) |
(30) |
8 |
|||||||
Net (gains) losses on asset dispositions |
54 |
(172) |
67 |
(155) |
|||||||
Equity companies' earnings (in excess of) less than dividends paid |
(6) |
(1) |
(53) |
(31) |
|||||||
Operating working capital |
(198) |
126 |
292 |
(399) |
|||||||
Postretirement benefits |
22 |
5 |
7 |
(16) |
|||||||
Other |
7 |
10 |
2 |
(10) |
|||||||
Cash Provided by Operations |
559 |
886 |
2,842 |
1,812 |
|||||||
Investing Activities |
|||||||||||
Capital spending |
(258) |
(298) |
(894) |
(867) |
|||||||
Proceeds from dispositions of property |
— |
205 |
5 |
206 |
|||||||
Investments in time deposits |
(186) |
(167) |
(509) |
(353) |
|||||||
Maturities of time deposits |
150 |
58 |
404 |
287 |
|||||||
Other |
7 |
(43) |
17 |
(40) |
|||||||
Cash Used for Investing |
(287) |
(245) |
(977) |
(767) |
|||||||
Financing Activities |
|||||||||||
Cash dividends paid |
(365) |
(354) |
(1,087) |
(1,054) |
|||||||
Change in short-term debt |
170 |
(219) |
(497) |
324 |
|||||||
Debt proceeds |
601 |
4 |
1,842 |
700 |
|||||||
Debt repayments |
(501) |
(2) |
(753) |
(705) |
|||||||
Proceeds from exercise of stock options |
77 |
51 |
212 |
211 |
|||||||
Acquisitions of common stock for the treasury |
(186) |
(214) |
(449) |
(544) |
|||||||
Other |
(1) |
(13) |
(40) |
(92) |
|||||||
Cash Used for Financing |
(205) |
(747) |
(772) |
(1,160) |
|||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
3 |
(12) |
(17) |
(8) |
|||||||
Change in Cash and Cash Equivalents |
70 |
(118) |
1,076 |
(123) |
|||||||
Cash and Cash Equivalents - Beginning of Period |
1,448 |
534 |
442 |
539 |
|||||||
Cash and Cash Equivalents - End of Period |
$ |
1,518 |
$ |
416 |
$ |
1,518 |
$ |
416 |
Unaudited |
|
|||||||||||||||
SELECTED BUSINESS SEGMENT DATA |
|||||||||||||||
(Millions) |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
||||||||||
|
|||||||||||||||
Personal Care |
$ |
2,339 |
$ |
2,305 |
+1 % |
$ |
6,990 |
$ |
6,866 |
+2 % |
|||||
Consumer Tissue |
1,623 |
1,484 |
+9 % |
4,991 |
4,482 |
+11 % |
|||||||||
K-C Professional |
705 |
839 |
-16 % |
2,277 |
2,477 |
-8 % |
|||||||||
Corporate & Other |
16 |
12 |
N.M. |
46 |
42 |
N.M. |
|||||||||
TOTAL |
$ |
4,683 |
$ |
4,640 |
+1 % |
$ |
14,304 |
$ |
13,867 |
+3 % |
|||||
OPERATING PROFIT |
|||||||||||||||
Personal Care |
$ |
486 |
$ |
490 |
-1 % |
$ |
1,532 |
$ |
1,459 |
+5 % |
|||||
Consumer Tissue |
318 |
264 |
+20 % |
1,111 |
726 |
+53 % |
|||||||||
K-C Professional |
87 |
176 |
-51 % |
423 |
488 |
-13 % |
|||||||||
Corporate & Other(a) |
(220) |
(190) |
N.M. |
(544) |
(599) |
N.M. |
|||||||||
Other (income) and expense, net(a) |
5 |
(175) |
N.M. |
27 |
(166) |
N.M. |
|||||||||
TOTAL OPERATING PROFIT |
$ |
666 |
$ |
915 |
-27 % |
$ |
2,495 |
$ |
2,240 |
+11 % |
(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 |
Currency |
Organic(b) |
|||||||
Personal Care |
1 |
4 |
— |
1 |
(4) |
5 |
||||||
Consumer Tissue |
9 |
10 |
— |
(1) |
— |
10 |
||||||
K-C Professional |
(16) |
(21) |
3 |
3 |
— |
(15) |
||||||
TOTAL CONSOLIDATED |
1 |
2 |
1 |
1 |
(2) |
3 |
||||||
Nine Months Ended |
||||||||||||
Total(a) |
Volume |
Net Price |
Mix/ Other |
Currency |
Organic(b) |
|||||||
Personal Care |
2 |
4 |
— |
2 |
(4) |
6 |
||||||
Consumer Tissue |
11 |
13 |
1 |
(1) |
(2) |
13 |
||||||
K-C Professional |
(8) |
(11) |
3 |
2 |
(1) |
(6) |
||||||
TOTAL CONSOLIDATED |
3 |
4 |
1 |
1 |
(3) |
6 |
(a) |
Total may not equal the sum of volume, net price, mix/other, exited businesses and currency due to rounding. |
(b) |
Combined impact of changes in volume, net price and mix/other. |
N.M. - Not Meaningful |
|
Unaudited |
|
||||||||
NON-GAAP RECONCILIATIONS |
||||||||
OUTLOOK FOR 2020 AND 2019 RESULTS |
||||||||
|
||||||||
ESTIMATED FULL YEAR 2020 DILUTED EARNINGS PER SHARE |
||||||||
Adjusted earnings per share |
$ |
7.50 |
— |
$ |
7.65 |
|||
Adjustment for charges related to the 2018 Global Restructuring Program |
(1.00) |
— |
(0.85) |
|||||
Softex Indonesia acquisition-related costs |
(0.09) |
— |
(0.08) |
|||||
Per share basis – diluted net income attributable to |
$ |
6.41 |
— |
$ |
6.72 |
Twelve Months Ended |
|||
FULL YEAR 2019 DILUTED EARNINGS PER SHARE |
|||
Adjusted earnings per share |
$ |
6.89 |
|
Adjustment for charges related to the 2018 Global Restructuring Program |
(0.72) |
||
Adjustment related to property sale gain |
0.07 |
||
Per share basis – diluted net income attributable to |
$ |
6.24 |
[KMB-F]
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SOURCE
Investor Relations contact: Paul Alexander, 972-281-1440, palexand@kcc.com, or Media Relations contact: Terry Balluck, 972-281-1397, terry.balluck@kcc.com