Kimberly-Clark Corporation — 2022 Form 10-K Summary
Business Context and Reporting Period
Kimberly-Clark is a global consumer products company operating through Personal Care, Consumer Tissue and K-C Professional. Key brands include Huggies, Kleenex, Scott, Cottonelle, Kotex, Depend and Thinx. The filing covers the fiscal year ended December 31, 2022; it does not provide a separate fourth-quarter financial summary.
Products are sold in more than 175 countries and territories. Approximately half of net sales are generated outside the United States. Walmart represented approximately 13% of consolidated 2022 sales.
Financial Performance and Key Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales | $20.175 billion | $19.440 billion | +4% |
| Gross profit | $6.219 billion | $5.988 billion | +4% |
| Operating profit | $2.681 billion | $2.561 billion | +5% |
| Net income attributable to Kimberly-Clark | $1.934 billion | $1.814 billion | +7% |
| Diluted EPS | $5.72 | $5.35 | +7% |
| Cash provided by operations | $2.733 billion | $2.730 billion | Approximately flat |
| Capital spending | $876 million | $1.007 billion | Down $131 million |
Approximate reported margins were 30.8% gross, 13.3% operating and 9.6% net. Adjusted operating profit was $2.617 billion versus $2.836 billion in 2021, and adjusted EPS was $5.63 versus $6.18. The filing’s adjusted measures exclude or adjust for pension settlement charges, the Thinx transaction and prior-year restructuring items.
- Personal Care sales were $10.622 billion, up 3%; operating profit was $1.787 billion, down 4%.
- Consumer Tissue sales were $6.243 billion, up 3%; operating profit was $806 million, down 9%.
- K-C Professional sales were $3.256 billion, up 6%; operating profit was $457 million, up 13%.
- Organic sales increased 7%, consisting primarily of higher pricing and mix, partly offset by a 3% volume decline. Foreign currency reduced reported sales by 4%.
- Input costs increased by approximately $1.5 billion, while FORCE cost savings contributed approximately $290 million.
Cash Flow, Debt and Liquidity
- Cash and cash equivalents were $427 million at year-end, compared with $270 million in 2021.
- Total debt was approximately $8.4 billion, compared with $8.6 billion in 2021; short-term debt was $373 million.
- Long-term debt, including the current portion, was $8.049 billion. Scheduled long-term debt maturities are $472 million in 2023, $524 million in 2024 and $550 million in 2025.
- The company maintained unused revolving credit facilities of $2.0 billion expiring in June 2026 and $775 million expiring in June 2023.
- Dividends paid were $1.558 billion, and share repurchases totaled $100 million. The company announced a 1.7% dividend increase for 2023 and targeted approximately $100 million to $150 million of 2023 share repurchases.
- Management expects 2023 capital spending of approximately $800 million to $900 million and a 2023 pension contribution of approximately $25 million.
- Contractual obligations totaled $18.231 billion, including $8.060 billion of long-term debt, $3.205 billion of related interest payments, $4.120 billion of unconditional purchase obligations and $539 million of operating lease liabilities.
Material Changes Versus the Prior Comparable Period
- Reported earnings improved despite a significant increase in commodity, energy, transportation and other input costs. Pricing actions and cost savings partially offset cost inflation, while volumes declined.
- Reported EPS benefited from nonrecurring items, including a $0.20 per-share net benefit from the Thinx acquisition. Pension settlement charges reduced 2022 EPS by $0.12.
- Thinx became a consolidated subsidiary after Kimberly-Clark increased its ownership to 58% in February 2022. The transaction generated an $85 million noncash gain from remeasuring the previously held investment and included $21 million of transaction and integration costs.
- The 2018 Global Restructuring Program was completed in 2021; 2022 results therefore did not include comparable restructuring charges. The program generated total pretax costs of approximately $2.2 billion.
- Net sales increased across all segments, but operating profit declined in Personal Care and Consumer Tissue. K-C Professional delivered the strongest operating-profit growth.
- The company entered into an agreement to sell its Neve tissue brand and related tissue assets in Brazil for $175 million, subject to adjustments and regulatory approval. Closing was expected in the first half of 2023.
- Kimberly-Clark adopted highly inflationary accounting for its Turkey operations effective April 1, 2022. Argentina was already subject to that accounting treatment.
Guidance, Outlook, Commentary and Risks
Management expects challenging market conditions to continue in 2023, including elevated input costs, pricing pressure, foreign-exchange volatility and competitive activity. The company plans to pursue balanced growth through brand investment, innovation, premiumization, e-commerce, expansion of Personal Care markets and continued FORCE productivity savings.
- Major cost pressures include pulp, resin, energy, distribution, transportation and labor. Management stated that the higher-cost environment was expected to continue in 2023.
- Pricing actions may support sales but could reduce volumes, market share or consumer demand, particularly as private-label competition increases.
- The Russia business represented approximately 1% to 2% of global sales, operating profit and total assets. Kimberly-Clark substantially curtailed activity, suspended capital investments and limited sales to essential products; assets could be partially or fully impaired.
- Supply-chain disruption, sole-source suppliers, geopolitical events, COVID-19 effects, cyberattacks, privacy regulation and the ongoing SAP enterprise-resource-planning upgrade could affect operations and financial results.
- Foreign-exchange translation reduced 2022 sales and would have reduced stockholders’ equity by approximately $650 million under the company’s disclosed 10% unfavorable exchange-rate sensitivity.
- Pending and potential contingencies include a Department of Justice investigation relating to the former health care business, environmental matters, tax examinations and litigation. Management currently believes these matters will not materially harm the company, although adverse outcomes could be material.
- Environmental capital expenditures and operating expenses were expected to be approximately $45 million and $115 million, respectively, in 2023; management did not expect these amounts to have a material financial effect.
Most Important Facts for Investors to Verify
- Whether pricing can continue to offset commodity inflation without causing further volume or market-share declines.
- The sustainability of adjusted operating profit and EPS excluding the Thinx gain, pension charges and other unusual items.
- Progress on 2023 FORCE savings, capital spending, working-capital management and cash conversion.
- Debt maturities, commercial-paper access and the June 2023 expiration of the $775 million revolving facility.
- Completion and proceeds of the planned Brazil asset sale and the financial performance and redemption obligations associated with Thinx’s minority interest.
- Exposure to Russia, foreign-exchange movements, supply-chain disruptions, cyber risks and the SAP system upgrade.
- The potential resolution and financial exposure from tax matters, the former health care business investigation and other legal proceedings.
- The $426 million trade-promotion accrual identified as a critical audit matter and the accuracy of the assumptions used to estimate customer claims.