Kimberly-Clark Corporation — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual Form 10-K rather than a standalone fourth-quarter filing; amounts are in millions except per-share data.
Business context
Kimberly-Clark is a global personal care, consumer tissue and K-C Professional products company. Key brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and WypAll. Products were sold in more than 175 countries, with approximately 41,000 employees and 82 principal production facilities across 33 countries. Walmart represented approximately 13% of consolidated net sales.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net sales | $20,431 | $20,175 | +1% |
| Gross profit | $7,032 | $6,219 | +13% |
| Operating profit | $2,344 | $2,681 | -13% |
| Net income attributable to Kimberly-Clark | $1,764 | $1,934 | -9% |
| Diluted EPS | $5.21 | $5.72 | -9% |
| Cash provided by operations | $3,542 | $2,733 | +$809 |
| Capital spending | $766 | $876 | -$110 |
Margins: Gross margin was approximately 34.4%, compared with 30.8% in 2022. Reported operating margin was approximately 11.5%, compared with 13.3%; reported net margin was approximately 8.6%, compared with 9.6%.
Adjusted results: Adjusted operating profit was $2,958, up 13%, and adjusted diluted EPS was $6.57, up 17%. Adjusted figures exclude the Brazil divestiture benefit, intangible-asset impairment charges and pension settlement charges.
- Personal Care: Sales of $10,691, up 1%; operating profit of $1,890, up 6%. Organic sales increased 5%.
- Consumer Tissue: Sales of $6,290, up 1%; operating profit of $976, up 21%. Organic sales increased 3%.
- K-C Professional: Sales of $3,404, up 5%; operating profit of $665, up 46%. Organic sales increased 7%.
Balance sheet and liquidity: Cash and cash equivalents were $1,093 at year-end, compared with $427 in 2022. Total debt was approximately $7,984, including $565 payable within one year, versus approximately $8,422 in 2022. Kimberly-Clark maintained an unused $2.0 billion revolving credit facility expiring in June 2028 and an unused $750 million facility expiring in May 2024. Management stated that operating cash flow and debt capacity were adequate for foreseeable funding needs.
Capital allocation: The company paid $1,588 of cash dividends, raised its dividend by 2% in 2023, and repurchased 1.8 million shares for $225. Dividends and repurchases totaled approximately $1.8 billion. The Board approved a 3.4% dividend increase for 2024.
Material changes versus the prior comparable period
- Organic sales increased 5%, but reported sales growth was limited by a 3% unfavorable currency impact and a 1% reduction from exited businesses.
- Higher pricing, product mix and $325 of FORCE cost savings supported adjusted operating profit, while lower volumes, elevated input costs, higher marketing and general expenses, and currency effects remained headwinds.
- The company recorded a $658 pre-tax, $483 after-tax noncash impairment of intangible assets, principally related to Softex Indonesia and Thinx. Softex accounted for approximately $593 of the pre-tax charge.
- Kimberly-Clark sold its Brazil Neve tissue brand and related tissue assets for $212, recording a $74 pre-tax gain and $30 of divestiture-related costs, resulting in a $44 pre-tax and $26 after-tax net benefit.
- The company acquired the remaining 30% of Thinx in the fourth quarter for $47, following a $48 purchase of additional ownership earlier in 2023. Total cash paid for Thinx redemptions during 2023 was $95.
- Operating cash flow improved primarily because of higher operating cash earnings and working-capital improvements, including lower inventories and receivables.
Guidance, outlook, risks and unusual items
- Management expects elevated raw-material, labor, energy and transportation costs to persist in 2024, although with a lower inflation rate than in 2023. Competitive pricing pressure and consumer trade-down remain concerns.
- Expected 2024 capital spending is approximately $900. Expected 2024 pension contributions are approximately $20, and defined-benefit pension expense is estimated at approximately $50.
- Environmental capital expenditures are expected to average approximately $50 annually in 2024 and 2025. Environmental compliance operating expenses are expected to be approximately $100 in 2024 and $110 in 2025.
- Management continues to emphasize brand investment, innovation, revenue growth management, e-commerce, Personal Care expansion and FORCE productivity savings.
- Principal risks include pulp, resin, energy and transportation inflation; supply-chain disruption; intense branded and private-label competition; retailer concentration; foreign currency and highly inflationary economies; geopolitical conflict, including the Russia-Ukraine war; cyberattacks and privacy incidents; climate and sustainability regulation; product liability and recalls; tax disputes; and potential impairment of goodwill or intangible assets.
- Russia represented approximately 1% to 2% of global sales, operating profit and total assets. Operations have been substantially curtailed and could be further impaired or disrupted.
- Legal proceedings include matters related to the former health care business and environmental sites. Management believes current proceedings are not expected to materially affect financial position, results or cash flows, but acknowledges that unfavorable outcomes could be material.
- The company disclosed no cybersecurity incident that had materially affected, or was reasonably likely to materially affect, its business, results of operations or financial condition as of the filing date.
- Auditor Deloitte & Touche issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter involved estimating trade promotion allowances and related revenue reductions.
Important facts for investors to verify
- Reconcile reported EPS of $5.21 with adjusted EPS of $6.57, particularly the $658 intangible-asset impairment and the Brazil divestiture benefit.
- Assess whether pricing and FORCE savings can offset persistent commodity, labor, energy and distribution costs without causing further volume or market-share erosion.
- Review debt maturities, including $566 due in 2024, and the May 2024 expiration of the $750 million revolving facility.
- Monitor the performance and valuation of Softex and Thinx after the 2023 impairment charges.
- Evaluate exposure to Walmart, private-label competition, foreign exchange, Argentina and Türkiye inflation, and geopolitical risks affecting Russia and other international markets.
- Review the $1.0 billion supplier-finance program balance recorded in trade accounts payable and its implications for working-capital analysis.
- Track pension funding, the approximately $1.0 billion of unrecognized investment and actuarial losses in the Principal Plans, and sensitivity to discount rates.
- Review tax contingencies, including unrecognized tax benefits of $588 and a Brazilian tax dispute with approximately $50 of proposed tax and penalty adjustments before interest.