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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________  
Commission file number 1-225
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13018003&doc=13
KIMBERLY CLARK CORPORATON
(Exact name of registrant as specified in its charter)
 
Delaware
 
39-0394230
(State or other jurisdiction of
incorporation)
 
(I.R.S. Employer
Identification No.)
P.O. Box 619100
Dallas, TX
75261-9100
(Address of principal executive offices)
(Zip code)
(972) 281-1200
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
KMB
New York Stock Exchange
0.625% Notes due 2024
KMB24
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
x
  
Accelerated filer
Non-accelerated filer
  
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  ☒
As of July 16, 2019, there were 344,136,273 shares of the Corporation's common stock outstanding.
 



Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)

 
 
Three Months Ended
June 30
 
Six Months Ended
June 30
(Millions of dollars, except per share amounts)
 
2019
 
2018
 
2019
 
2018
Net Sales
 
$
4,594

 
$
4,604

 
$
9,227

 
$
9,335

Cost of products sold
 
3,108

 
3,149

 
6,313

 
6,556

Gross Profit
 
1,486

 
1,455

 
2,914

 
2,779

Marketing, research and general expenses
 
811

 
771

 
1,580

 
1,850

Other (income) and expense, net
 
5

 
10

 
9

 
8

Operating Profit
 
670

 
674

 
1,325

 
921

Nonoperating expense
 
(11
)
 
(36
)
 
(22
)
 
(45
)
Interest income
 
2

 
3

 
5

 
5

Interest expense
 
(67
)
 
(68
)
 
(132
)
 
(134
)
Income Before Income Taxes and Equity Interests
 
594

 
573

 
1,176

 
747

Provision for income taxes
 
(132
)
 
(138
)
 
(275
)
 
(242
)
Income Before Equity Interests
 
462

 
435

 
901

 
505

Share of net income of equity companies
 
33

 
30

 
60

 
57

Net Income
 
495

 
465

 
961

 
562

Net income attributable to noncontrolling interests
 
(10
)
 
(10
)
 
(22
)
 
(14
)
Net Income Attributable to Kimberly-Clark Corporation
 
$
485

 
$
455

 
$
939

 
$
548

 
 
 
 
 
 
 
 
 
Per Share Basis
 
 
 
 
 
 
 
 
Net Income Attributable to Kimberly-Clark Corporation
 
 
 
 
 
 
 
 
Basic
 
$
1.41

 
$
1.30

 
$
2.73

 
$
1.57

Diluted
 
$
1.40

 
$
1.30

 
$
2.71

 
$
1.56

See notes to the unaudited interim consolidated financial statements.


1



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
 
Three Months Ended
June 30
 
Six Months Ended
June 30
(Millions of dollars)
 
2019
 
2018
 
2019
 
2018
Net Income
 
$
495

 
$
465

 
$
961

 
$
562

Other Comprehensive Income (Loss), Net of Tax
 
 
 
 
 
 
 
 
   Unrealized currency translation adjustments
 
(4
)
 
(381
)
 
22

 
(264
)
   Employee postretirement benefits
 
26

 
79

 
22

 
79

   Other
 
(3
)
 
29

 
(20
)
 
28

Total Other Comprehensive Income (Loss), Net of Tax
 
19

 
(273
)
 
24

 
(157
)
Comprehensive Income
 
514

 
192

 
985

 
405

   Comprehensive (income) loss attributable to noncontrolling interests
 
(9
)
 
1

 
(16
)
 
(4
)
Comprehensive Income Attributable to Kimberly-Clark Corporation
 
$
505

 
$
193

 
$
969

 
$
401

See notes to the unaudited interim consolidated financial statements.


2



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(2019 Data is Unaudited)


(Millions of dollars)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
534

 
$
539

Accounts receivable, net
 
2,397

 
2,164

Inventories
 
1,856

 
1,813

Other current assets
 
534

 
525

Total Current Assets
 
5,321

 
5,041

Property, Plant and Equipment, Net
 
7,207

 
7,159

Investments in Equity Companies
 
249

 
224

Goodwill
 
1,478

 
1,474

Other Assets
 
1,092

 
620

TOTAL ASSETS
 
$
15,347

 
$
14,518

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current Liabilities
 
 
 
 
Debt payable within one year
 
$
1,291

 
$
1,208

Trade accounts payable
 
2,993

 
3,190

Accrued expenses and other current liabilities
 
1,946

 
1,793

Dividends payable
 
355

 
345

Total Current Liabilities
 
6,585

 
6,536

Long-Term Debt
 
6,701

 
6,247

Noncurrent Employee Benefits
 
889

 
931

Deferred Income Taxes
 
513

 
458

Other Liabilities
 
571

 
328

Redeemable Preferred Securities of Subsidiaries
 
38

 
64

Stockholders' Equity
 
 
 
 
Kimberly-Clark Corporation
 
 
 
 
Preferred stock - no par value - authorized 20.0 million shares, none issued
 

 

Common stock - $1.25 par value - authorized 1.2 billion shares; issued 378.6 million shares at June 30, 2019 and December 31, 2018
 
473

 
473

Additional paid-in capital
 
510

 
548

Common stock held in treasury, at cost - 34.4 and 33.6 million shares at June 30, 2019 and December 31, 2018, respectively
 
(4,062
)
 
(3,956
)
Retained earnings
 
6,170

 
5,947

Accumulated other comprehensive income (loss)
 
(3,269
)
 
(3,299
)
Total Kimberly-Clark Corporation Stockholders' Equity
 
(178
)
 
(287
)
Noncontrolling Interests
 
228

 
241

Total Stockholders' Equity
 
50

 
(46
)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
15,347

 
$
14,518

See notes to the unaudited interim consolidated financial statements.


3



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)



 
 
Three Months Ended June 30, 2019
(Millions of dollars, shares in thousands, except per share amounts)
 
Common Stock
Issued
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
Balance at March 31, 2019
 
378,597

 
$
473
 
 
$
538

 
34,657

 
$
(4,075
)
 
$
6,048

 
$
(3,289
)
 
$
223

 
$
(82
)
Net income in stockholders' equity, excludes redeemable interests' share
 

 
 
 

 

 
 
 
485

 
 
 
9

 
494

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
20
 
 
(2
)
 
18

Stock-based awards exercised or vested
 

 
 
 
(60
)
 
(1,672
)
 
192
 
 

 
 
 

 
132

Shares repurchased
 

 
 
 

 
1,396

 
(179
)
 

 
 
 

 
(179
)
Recognition of stock-based compensation
 

 
 
 
31

 

 
 
 

 
 
 

 
31

Dividends declared ($1.03 per share)
 

 
 
 

 

 
 
 
(355
)
 
 
 

 
(355
)
Other
 

 
 
 
1

 

 
 
 
(8
)
 
 
 
(2
)
 
(9
)
Balance at June 30, 2019
 
378,597

 
$
473
 
 
$
510

 
34,381

 
$
(4,062
)
 
$
6,170

 
$
(3,269
)
 
$
228

 
$
50



 
 
Six Months Ended June 30, 2019
(Millions of dollars, shares in thousands, except per share amounts)
 
Common Stock
Issued
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
Balance at December 31, 2018
 
378,597

 
$
473
 
 
$
548

 
33,635

 
$
(3,956
)
 
$
5,947

 
$
(3,299
)
 
$
241

 
$
(46
)
Net income in stockholders' equity, excludes redeemable interests' share
 

 
 
 

 

 
 
 
939

 
 
 
20

 
959

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
30
 
 
(7
)
 
23

Stock-based awards exercised or vested
 

 
 
 
(87
)
 
(2,159
)
 
247
 
 

 
 
 

 
160

Shares repurchased
 

 
 
 

 
2,905

 
(353
)
 

 
 
 

 
(353
)
Recognition of stock-based compensation
 

 
 
 
48

 

 
 
 

 
 
 

 
48

Dividends declared ($2.06 per share)
 

 
 
 

 

 
 
 
(709
)
 
 
 
(24
)
 
(733
)
Other
 

 
 
 
1

 

 
 
 
(7
)
 
 
 
(2
)
 
(8
)
Balance at June 30, 2019
 
378,597

 
$
473
 
 
$
510

 
34,381

 
$
(4,062
)
 
$
6,170

 
$
(3,269
)
 
$
228

 
$
50



See notes to the unaudited interim consolidated financial statements.



4



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)



 
 
Three Months Ended June 2018
(Millions of dollars, shares in thousands, except per share amounts)
 
Common Stock
Issued
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
Balance at March 31, 2018
 
378,597

 
$
473
 
 
$
589

 
29,001

 
$
(3,460
)
 
$
5,520

 
$
(2,805
)
 
$
238

 
$
555

Net income in stockholders' equity, excludes redeemable interests' share
 

 
 
 

 

 
 
 
455

 
 
 
9

 
464

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(262
)
 
(11
)
 
(273
)
Stock-based awards exercised or vested
 

 
 
 
(54
)
 
(568
)
 
64
 
 

 
 
 

 
10

Shares repurchased
 

 
 
 

 
2,280

 
(236
)
 

 
 
 

 
(236
)
Recognition of stock-based compensation
 

 
 
 
8

 

 
 
 

 
 
 

 
8

Dividends declared ($1.00 per share)
 

 
 
 

 

 
 
 
(349
)
 
 
 

 
(349
)
Other
 

 
 
 
(1
)
 

 
 
 
156

 
(155
)
 
(1
)
 
(1
)
Balance at June 30, 2018
 
378,597

 
$
473
 
 
$
542

 
30,713

 
$
(3,632
)
 
$
5,782

 
$
(3,222
)
 
$
235

 
$
178



 
 
Six Months Ended June 2018
(Millions of dollars, shares in thousands, except per share amounts)
 
Common Stock
Issued
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Non-controlling Interests
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
Balance at December 31, 2017
 
378,597

 
$
473
 
 
$
594

 
27,491

 
$
(3,288
)
 
$
5,769

 
$
(2,919
)
 
$
253

 
$
882

Net income in stockholders' equity, excludes redeemable interests' share
 

 
 
 

 

 
 
 
548

 
 
 
12

 
560

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(147
)
 
(10
)
 
(157
)
Stock-based awards exercised or vested
 

 
 
 
(79
)
 
(907
)
 
103
 
 

 
 
 

 
24

Shares repurchased
 

 
 
 

 
4,129

 
(447
)
 

 
 
 

 
(447
)
Recognition of stock-based compensation
 

 
 
 
25

 

 
 
 

 
 
 

 
25

Dividends declared ($2.00 per share)
 

 
 
 

 

 
 
 
(699
)
 
 
 
(20
)
 
(719
)
Other
 

 
 
 
2

 

 
 
 
164

 
(156
)
 

 
10

Balance at June 30, 2018
 
378,597

 
$
473
 
 
$
542

 
30,713

 
$
(3,632
)
 
$
5,782

 
$
(3,222
)
 
$
235

 
$
178



See notes to the unaudited interim consolidated financial statements.




5



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
 
 
 
Six Months Ended June 30
(Millions of dollars)
 
2019
 
2018
Operating Activities
 
 
 
 
Net income
 
$
961

 
$
562

Depreciation and amortization
 
470

 
435

Asset impairments
 

 
74

Stock-based compensation
 
48

 
26

Deferred income taxes
 
26

 
17

Net losses on asset dispositions
 
17

 
53

Equity companies' earnings in excess of dividends paid
 
(30
)
 
(25
)
Operating working capital
 
(525
)
 
93

Postretirement benefits
 
(21
)
 
(14
)
Other
 
(20
)
 
108

Cash Provided by Operations
 
926

 
1,329

Investing Activities
 
 
 
 
Capital spending
 
(569
)
 
(347
)
Investments in time deposits
 
(186
)
 
(147
)
Maturities of time deposits
 
229

 
94

Other
 
4

 
(12
)
Cash Used for Investing
 
(522
)
 
(412
)
Financing Activities
 
 
 
 
Cash dividends paid
 
(700
)
 
(691
)
Change in short-term debt
 
543

 
104

Debt proceeds
 
696

 

Debt repayments
 
(703
)
 
(4
)
Proceeds from exercise of stock options
 
160

 
22

Acquisitions of common stock for the treasury
 
(330
)
 
(420
)
Other
 
(79
)
 
(41
)
Cash Used for Financing
 
(413
)
 
(1,030
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
 
4

 
(19
)
Change in Cash and Cash Equivalents
 
(5
)
 
(132
)
Cash and Cash Equivalents - Beginning of Period
 
539

 
616

Cash and Cash Equivalents - End of Period
 
$
534

 
$
484

See notes to the unaudited interim consolidated financial statements.


6



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10‑K for the year ended December 31, 2018. The terms "Corporation," "Kimberly-Clark," "K-C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
Highly Inflationary Accounting in Argentina
GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiaries in Argentina (“K-C Argentina”). Under highly inflationary accounting, K-C Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material.  As of June 30, 2019, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were less than 2 percent of our consolidated net sales for the six months ended June 30, 2019 and 2018.
Leases
Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists.  Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.  These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable.  Lease assets also include any upfront lease payments made and exclude lease incentives.  Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.
Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease.  Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.
Lease agreements with lease and nonlease components are combined as a single lease component.  The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Recently Adopted Accounting Standards
The Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. The new guidance requires a lessee to recognize assets and liabilities for all leases with lease terms of more than 12 months and provide additional disclosures. The ASU requires adoption using a modified retrospective transition approach with either 1) periods prior to the adoption date being recast or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast.  We adopted this standard on January 1, 2019 using the cumulative-effect adjustment approach. We elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019 whereby these contracts were not reassessed or reclassified from their previous assessment as of December 31, 2018. We also elected certain other practical expedients in transition including not reassessing existing land easements as lease contracts. For all new and modified leases after adoption of the ASU, we have taken the component election allowing us to account for lease components together with nonlease components in the calculation of the lease asset and corresponding liability. We implemented processes and a lease accounting system to ensure adequate internal controls were in place to assess our contracts and enable proper accounting and reporting of

7



financial information upon adoption.  No cumulative-effect adjustment was recognized as the amount was not material, and the impact on our results of operations and cash flows was also not material. See Note 7 for the financial position impact and additional disclosures.
The FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard makes more financial and non-financial hedging strategies eligible for hedge accounting. It also amends presentation and disclosure requirements and changes how companies assess hedge effectiveness. This ASU requires adoption using a modified retrospective transition approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. We adopted this standard on January 1, 2019 with no cumulative-effect adjustment as the amount was not material. The effects of this standard on our financial position, results of operations and cash flows were not material.
Accounting Standards Issued - Not Yet Adopted
The FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820).  The new guidance modifies disclosure requirements related to fair value measurement.  The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Implementation on a prospective or retrospective basis varies by specific disclosure requirement.  Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date.
The FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40).  The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).  For public companies, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.  Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.  The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.
Note 2.    2018 Global Restructuring Program
In January 2018, we announced the 2018 Global Restructuring Program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. We expect to close or sell approximately 10 manufacturing facilities and expand production capacity at several others. We expect to exit or divest some lower-margin businesses that generate approximately 1 percent of our net sales. The sales are concentrated in our consumer tissue business segment. The restructuring is expected to impact our organizations in all major geographies. Workforce reductions are expected to be in the range of 5,000 to 5,500. Certain capital appropriations under the 2018 Global Restructuring Program are being finalized. Accounting for actions related to each appropriation will commence when the appropriation is authorized for execution.
The restructuring is expected to be completed by the end of 2020, with total costs anticipated to be $1.7 billion to $1.9 billion pre-tax ($1.35 billion to $1.5 billion after tax). Cash costs are expected to be $900 to $1.0 billion, primarily related to workforce reductions.  Non-cash charges are expected to be $800 to $900 pre-tax and will primarily consist of incremental depreciation, asset write-offs and pension settlement and curtailment charges. Restructuring charges in 2019 are expected to be $400 to $500 pre-tax ($320 to $400 after tax).

8



The following charges were incurred in connection with the 2018 Global Restructuring Program:
 
Three Months Ended
June 30
 
Six Months Ended
June 30
 
2019
 
2018
 
2019
 
2018
Cost of products sold:
 
 
 
 
 
 
 
Charges for workforce reductions
$
2

 
$
6

 
$
32

 
$
125

Asset impairments

 

 

 
74

Asset write-offs
15

 
31

 
27

 
86

Incremental depreciation
65

 
40

 
132

 
68

Other exit costs
20

 
8

 
36

 
9

Total
102

 
85

 
227

 
362

Marketing, research and general expenses:
 
 
 
 
 
 
 
Charges for workforce reductions
(12
)
 
(16
)
 
(8
)
 
270

Other exit costs
29

 
31

 
53

 
45

Total
17

 
15

 
45

 
315

Other (income) and expense, net

 

 
(1
)
 

Nonoperating expense(a)

 
30

 

 
30

Total charges
119

 
130

 
271

 
707

Provision for income taxes
(27
)
 
(24
)
 
(58
)
 
(167
)
Net charges
92

 
106

 
213

 
540

Net impact related to equity companies and noncontrolling interests

 
(4
)
 
1

 
(10
)
Net charges attributable to Kimberly-Clark Corporation
$
92

 
$
102

 
$
214

 
$
530


(a)
Represents non-cash pension settlement charges resulting from restructuring actions. 
The asset impairment charges were measured based on the excess of the carrying value of the impacted asset groups over their fair values. These fair values were measured by using discounted cash flows expected over the limited time the assets would remain in use and as a result, the assets were essentially written off. The use of discounted cash flows represents a level 3 measure under the fair value hierarchy.
The following summarizes the restructuring liabilities activity:
 
 
2019
 
2018
Restructuring liabilities at January 1
 
$
210

 
$

Charges for workforce reductions and other cash exit costs
 
112

 
446

Cash payments
 
(142
)
 
(158
)
Currency and other
 
6

 
(13
)
Restructuring liabilities at June 30
 
$
186

 
$
275


Restructuring liabilities of $125 and $157 are recorded in Accrued expenses and other current liabilities and $61 and $118 are recorded in Other Liabilities as of June 30, 2019 and 2018, respectively. The impact related to restructuring charges is recorded in Operating working capital and Other Operating Activities, as appropriate, in our consolidated cash flow statements.
Through June 30, 2019, cumulative pre-tax charges for the 2018 Global Restructuring Program were $1.3 billion ($1.0 billion after tax).
Note 3. Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). In the period ended December 31, 2017, we recorded a provisional discrete net tax benefit related to the transition tax, remeasurement of deferred taxes, our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances, and actions taken in anticipation of the Tax Act. The provisional amounts recorded in 2017 were finalized in 2018.  During 2018, we recorded discrete net tax expense related to new guidance issued during 2018 affecting tax benefits we recorded in the period ended December 31, 2017 for the transition tax and certain tax planning actions taken in anticipation of the

9



Tax Act.  At December 31, 2018, we finalized our policy and elected to use the period cost method for global intangible low-taxed income (“GILTI”) provisions and therefore have not recorded deferred taxes for basis differences expected to reverse in future periods.
In the first quarter of 2018, we recorded discrete net tax expense of $82 primarily related to guidance issued affecting tax benefits we recorded in the fourth quarter of 2017 for certain tax planning actions taken in anticipation of the Tax Act. 
The Brazilian tax authority, Secretaria da Receita Federal do Brasil ("RFB"), concluded an audit for the taxable periods from 2008-2013. This audit included a review of our determinations of amortization of certain goodwill arising from prior acquisitions in Brazil, and the RFB has proposed adjustments that effectively eliminate the goodwill amortization benefits related to these transactions. Administrative appeals have been exhausted, and the dispute is moving into the judicial phase. The amount of the proposed tax adjustments and penalties is approximately $90 as of June 30, 2019 (translated at the June 30, 2019 currency exchange rate).  The amount ultimately in dispute will be significantly greater because of interest. We believe we have meritorious defenses and intend to vigorously defend these proposed adjustments; however, it is expected to take a number of years to reach resolution of this matter.
Note 4. Fair Value Information
The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:
Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
During the six months ended June 30, 2019 and for the full year 2018, there were no significant transfers among level 1, 2, or 3 fair value determinations.
Derivative assets and liabilities are measured on a recurring basis at fair value. At June 30, 2019 and December 31, 2018, derivative assets were $31 and $30, respectively, and derivative liabilities were $34 and $18, respectively. The fair values of derivatives used to manage interest rate risk and commodity price risk are based on LIBOR rates and interest rate swap curves and NYMEX price quotations, respectively. The fair values of hedging instruments used to manage foreign currency risk are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. Measurement of our derivative assets and liabilities is considered a level 2 measurement. Additional information on our classification and use of derivative instruments is contained in Note 8.
Redeemable preferred securities of subsidiaries are measured on a recurring basis at fair value and were $38 and $64 at June 30, 2019 and December 31, 2018, respectively. They are not traded in active markets. As of June 30, 2019, the fair values of the redeemable securities were based on a discounted cash flow valuation model. Measurement of the redeemable preferred securities is considered a level 3 measurement.
Company-owned life insurance ("COLI") assets are measured on a recurring basis at fair value. COLI assets were $71 and $64 at June 30, 2019 and December 31, 2018, respectively. The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in Other Assets. The COLI policies are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.

10



The following table includes the fair value of our financial instruments for which disclosure of fair value is required:
 
Fair Value Hierarchy Level
 
Carrying Amount
 
Estimated Fair Value
 
Carrying Amount
 
Estimated Fair Value
 
 
 
 
 
 
 
 
 
 
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents(a)
1
 
$
534

 
$
534

 
$
539

 
$
539

Time deposits(b)
1
 
204

 
204

 
256

 
256

Liabilities
 
 
 
 
 
 
 
 
 
Short-term debt(c)
2
 
1,031

 
1,031

 
495

 
495

Long-term debt(d)
2
 
6,961

 
7,668

 
6,960

 
7,192

(a)
Cash equivalents are composed of certificates of deposit, time deposits and other interest-bearing investments with original maturity dates of 90 days or less. Cash equivalents are recorded at cost, which approximates fair value.
(b)
Time deposits are composed of deposits with original maturities of more than 90 days but less than one year and instruments with original maturities of greater than one year, included in Other current assets or Other Assets in the consolidated balance sheet, as appropriate. Time deposits are recorded at cost, which approximates fair value.
(c)
Short-term debt is composed of U.S. commercial paper and/or other similar short-term debt issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(d)
Long-term debt includes the current portion of these debt instruments. Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.
Note 5. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
 
 
Three Months Ended
June 30
 
Six Months Ended
June 30
(Millions of shares)
 
2019
 
2018
 
2019
 
2018
Basic
 
344.2

 
348.8

 
344.3

 
349.6

Dilutive effect of stock options and restricted share unit awards
 
1.8

 
1.5

 
1.7

 
1.7

Diluted
 
346.0

 
350.3

 
346.0

 
351.3


The impact of options outstanding that were not included in the computation of diluted EPS because their exercise price was greater than the average market price of the common shares was insignificant. The number of common shares outstanding as of June 30, 2019 and 2018 was 344.2 million and 347.9 million, respectively.
Note 6. Stockholders' Equity
Net unrealized currency gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are recorded in Accumulated Other Comprehensive Income ("AOCI"). For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in AOCI rather than net income. Upon sale or substantially complete liquidation of any of these subsidiaries, the applicable unrealized translation would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation.
Also included in unrealized translation amounts are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.
The change in net unrealized currency translation for the six months ended June 30, 2019