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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 September 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=13157618&doc=11
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 x
As of October 15, 2019, there were 342,805,599 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
September 30
 
Nine Months Ended
September 30
(Millions of dollars, except per share amounts)
 
2019
 
2018
 
2019
 
2018
Net Sales
 
$
4,640

 
$
4,582

 
$
13,867

 
$
13,917

Cost of products sold
 
3,085

 
3,166

 
9,398

 
9,722

Gross Profit
 
1,555

 
1,416

 
4,469

 
4,195

Marketing, research and general expenses
 
815

 
749

 
2,395

 
2,599

Other (income) and expense, net
 
(175
)
 
(2
)
 
(166
)
 
6

Operating Profit
 
915

 
669

 
2,240

 
1,590

Nonoperating expense
 
(11
)
 
(30
)
 
(33
)
 
(75
)
Interest income
 
3

 
2

 
8

 
7

Interest expense
 
(66
)
 
(64
)
 
(198
)
 
(198
)
Income Before Income Taxes and Equity Interests
 
841

 
577

 
2,017

 
1,324

Provision for income taxes
 
(192
)
 
(138
)
 
(467
)
 
(380
)
Income Before Equity Interests
 
649

 
439

 
1,550

 
944

Share of net income of equity companies
 
31

 
23

 
91

 
80

Net Income
 
680

 
462

 
1,641

 
1,024

Net income attributable to noncontrolling interests
 
(9
)
 
(11
)
 
(31
)
 
(25
)
Net Income Attributable to Kimberly-Clark Corporation
 
$
671

 
$
451

 
$
1,610

 
$
999

 
 
 
 
 
 
 
 
 
Per Share Basis
 
 
 
 
 
 
 
 
Net Income Attributable to Kimberly-Clark Corporation
 
 
 
 
 
 
 
 
Basic
 
$
1.95

 
$
1.30

 
$
4.68

 
$
2.86

Diluted
 
$
1.94

 
$
1.29

 
$
4.65

 
$
2.85

See notes to the unaudited interim consolidated financial statements.


1



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

 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Millions of dollars)
 
2019
 
2018
 
2019
 
2018
Net Income
 
$
680

 
$
462

 
$
1,641

 
$
1,024

Other Comprehensive Income (Loss), Net of Tax
 
 
 
 
 
 
 
 
   Unrealized currency translation adjustments
 
(170
)
 
(79
)
 
(148
)
 
(343
)
   Employee postretirement benefits
 
16

 
22

 
38

 
101

   Other
 
2

 
3

 
(18
)
 
31

Total Other Comprehensive Income (Loss), Net of Tax
 
(152
)
 
(54
)
 
(128
)
 
(211
)
Comprehensive Income
 
528

 
408

 
1,513

 
813

   Comprehensive (income) loss attributable to noncontrolling interests
 
1

 
(10
)
 
(15
)
 
(14
)
Comprehensive Income Attributable to Kimberly-Clark Corporation
 
$
529

 
$
398

 
$
1,498

 
$
799

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)
 
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
416

 
$
539

Accounts receivable, net
 
2,306

 
2,164

Inventories
 
1,779

 
1,813

Other current assets
 
563

 
525

Total Current Assets
 
5,064

 
5,041

Property, Plant and Equipment, Net
 
7,158

 
7,159

Investments in Equity Companies
 
294

 
224

Goodwill
 
1,438

 
1,474

Other Assets
 
1,079

 
620

TOTAL ASSETS
 
$
15,033

 
$
14,518

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current Liabilities
 
 
 
 
Debt payable within one year
 
$
1,555

 
$
1,208

Trade accounts payable
 
2,942

 
3,190

Accrued expenses and other current liabilities
 
1,931

 
1,793

Dividends payable
 
354

 
345

Total Current Liabilities
 
6,782

 
6,536

Long-Term Debt
 
6,198

 
6,247

Noncurrent Employee Benefits
 
881

 
931

Deferred Income Taxes
 
506

 
458

Other Liabilities
 
540

 
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 September 30, 2019 and December 31, 2018
 
473

 
473

Additional paid-in capital
 
535

 
548

Common stock held in treasury, at cost - 35.5 and 33.6 million shares at September 30, 2019 and December 31, 2018, respectively
 
(4,222
)
 
(3,956
)
Retained earnings
 
6,485

 
5,947

Accumulated other comprehensive income (loss)
 
(3,412
)
 
(3,299
)
Total Kimberly-Clark Corporation Stockholders' Equity
 
(141
)
 
(287
)
Noncontrolling Interests
 
229

 
241

Total Stockholders' Equity
 
88

 
(46
)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
15,033

 
$
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 September 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 June 30, 2019
 
378,597

 
$
473
 
 
$
510

 
34,381

 
$
(4,062
)
 
$
6,170

 
$
(3,269
)
 
$
228

 
$
50

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

 
 
 

 

 
 
 
671

 
 
 
8

 
679

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(142
)
 
(10
)
 
(152
)
Stock-based awards exercised or vested
 

 
 
 
(3
)
 
(483
)
 
55
 
 

 
 
 

 
52

Shares repurchased
 

 
 
 

 
1,562

 
(215
)
 

 
 
 

 
(215
)
Recognition of stock-based compensation
 

 
 
 
24

 

 
 
 

 
 
 

 
24

Dividends declared ($1.03 per share)
 

 
 
 

 

 
 
 
(354
)
 
 
 

 
(354
)
Other
 

 
 
 
4

 

 
 
 
(2
)
 
$
(1
)
 
3

 
4

Balance at September 30, 2019
 
378,597

 
$
473
 
 
$
535

 
35,460

 
$
(4,222
)
 
$
6,485

 
$
(3,412
)
 
$
229

 
$
88



 
 
Nine Months Ended September 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
 

 
 
 

 

 
 
 
1,610

 
 
 
28

 
1,638

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(112
)
 
(17
)
 
(129
)
Stock-based awards exercised or vested
 

 
 
 
(90
)
 
(2,642
)
 
302
 
 

 
 
 

 
212

Shares repurchased
 

 
 
 

 
4,467

 
(568
)
 

 
 
 

 
(568
)
Recognition of stock-based compensation
 

 
 
 
72

 

 
 
 

 
 
 

 
72

Dividends declared ($3.09 per share)
 

 
 
 

 

 
 
 
(1,063
)
 
 
 
(24
)
 
(1,087
)
Other
 

 
 
 
5

 

 
 
 
(9
)
 
(1
)
 
1

 
(4
)
Balance at September 30, 2019
 
378,597

 
$
473
 
 
$
535

 
35,460

 
$
(4,222
)
 
$
6,485

 
$
(3,412
)
 
$
229

 
$
88



See notes to the unaudited interim consolidated financial statements.



4



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



 
 
Three Months Ended September 30, 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 June 30, 2018
 
378,597

 
$
473
 
 
$
542

 
30,713

 
$
(3,632
)
 
$
5,782

 
$
(3,222
)
 
$
235

 
$
178

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

 
 
 

 

 
 
 
451

 
 
 
10

 
461

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(53
)
 

 
(53
)
Stock-based awards exercised or vested
 

 
 
 
(8
)
 
(300
)
 
34
 
 

 
 
 

 
26

Shares repurchased
 

 
 
 

 
1,561

 
(174
)
 

 
 
 

 
(174
)
Recognition of stock-based compensation
 

 
 
 
19

 

 
 
 

 
 
 

 
19

Dividends declared ($1.00 per share)
 

 
 
 

 

 
 
 
(347
)
 
 
 

 
(347
)
Other
 

 
 
 
2

 

 
 
 

 
 
 

 
2

Balance at September 30, 2018
 
378,597

 
$
473
 
 
$
555

 
31,974

 
$
(3,772
)
 
$
5,886

 
$
(3,275
)
 
$
245

 
$
112



 
 
Nine Months Ended September 30, 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
 

 
 
 

 

 
 
 
999

 
 
 
22

 
1,021

Other comprehensive income, net of tax
 

 
 
 

 

 
 
 

 
(200
)
 
(10
)
 
(210
)
Stock-based awards exercised or vested
 

 
 
 
(87
)
 
(1,207
)
 
137
 
 

 
 
 

 
50

Shares repurchased
 

 
 
 

 
5,690

 
(621
)
 

 
 
 

 
(621
)
Recognition of stock-based compensation
 

 
 
 
44

 

 
 
 

 
 
 

 
44

Dividends declared ($3.00 per share)
 

 
 
 

 

 
 
 
(1,046
)
 
 
 
(20
)
 
(1,066
)
Other
 

 
 
 
4

 

 
 
 
164

 
(156
)
 

 
12

Balance at September 30, 2018
 
378,597

 
$
473
 
 
$
555

 
31,974

 
$
(3,772
)
 
$
5,886

 
$
(3,275
)
 
$
245

 
$
112



See notes to the unaudited interim consolidated financial statements.




5



KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
 
 
 
Nine Months Ended
September 30
(Millions of dollars)
 
2019
 
2018
Operating Activities
 
 
 
 
Net income
 
$
1,641

 
$
1,024

Depreciation and amortization
 
700

 
652

Asset impairments
 

 
74

Stock-based compensation
 
74

 
45

Deferred income taxes
 
8

 
44

Net (gains) losses on asset dispositions
 
(155
)
 
57

Equity companies' earnings in excess of dividends paid
 
(31
)
 
(18
)
Operating working capital
 
(399
)
 
117

Postretirement benefits
 
(16
)
 
(87
)
Other
 
(10
)
 
113

Cash Provided by Operations
 
1,812

 
2,021

Investing Activities
 
 
 
 
Capital spending
 
(867
)
 
(566
)
Proceeds from dispositions of property
 
206

 
16

Investments in time deposits
 
(353
)
 
(218
)
Maturities of time deposits
 
287

 
139

Other
 
(40
)
 
(3
)
Cash Used for Investing
 
(767
)
 
(632
)
Financing Activities
 
 
 
 
Cash dividends paid
 
(1,054
)
 
(1,039
)
Change in short-term debt
 
324

 
453

Debt proceeds
 
700

 

Debt repayments
 
(705
)
 
(310
)
Proceeds from exercise of stock options
 
211

 
50

Acquisitions of common stock for the treasury
 
(544
)
 
(596
)
Other
 
(92
)
 
(41
)
Cash Used for Financing
 
(1,160
)
 
(1,483
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
 
(8
)
 
(28
)
Change in Cash and Cash Equivalents
 
(123
)
 
(122
)
Cash and Cash Equivalents - Beginning of Period
 
539

 
616

Cash and Cash Equivalents - End of Period
 
$
416

 
$
494

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.
Annual Goodwill Impairment Assessment
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not amortized, but rather is assessed for impairment annually and whenever events and circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit carrying amount, including goodwill, with its fair value.  Fair value is estimated based on discounted cash flows. If the reporting unit carrying amount, including goodwill, exceeds its fair value, a goodwill impairment charge for the excess amount above fair value would be recorded.   For 2019, we completed the required annual testing of goodwill for impairment for all of our reporting units using the first day of the third quarter as the measurement date, and determined through quantitative impairment testing that goodwill is not impaired.
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 September 30, 2019, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were approximately 1 percent of our consolidated net sales for the nine months ended September 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.
Certain 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

7



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 generally 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 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.
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.  We early adopted this standard as of July 1, 2019 on a prospective basis. The impact on our disclosures was not material.
Accounting Standards Issued - Not Yet Adopted
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 $375 to $425 pre-tax ($300 to $345 after tax).

8



The following net charges were incurred in connection with the 2018 Global Restructuring Program:
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
 
2019
 
2018
 
2019
 
2018
Cost of products sold:
 
 
 
 
 
 
 
Charges for workforce reductions
$
1

 
$
31

 
$
33

 
$
156

Asset impairments

 

 

 
74

Asset write-offs
18

 
16

 
45

 
102

Incremental depreciation
57

 
47

 
189

 
115

Other exit costs
28

 
9

 
64

 
18

Total
104

 
103

 
331

 
465

Marketing, research and general expenses:
 
 
 
 
 
 
 
Charges (adjustments) for workforce reductions
(4
)
 
(13
)
 
(12
)
 
257

Other exit costs
25

 
39

 
78

 
84

Total
21

 
26

 
66

 
341

Other (income) and expense, net
(181
)
 

 
(182
)
 

Nonoperating expense(a)

 
20

 

 
50

Total charges
(56
)
 
149

 
215

 
856

Provision for income taxes
23

 
(30
)
 
(35
)
 
(197
)
Net charges
(33
)
 
119

 
180

 
659

Net impact related to equity companies and noncontrolling interests

 

 
1

 
(10
)
Net charges attributable to Kimberly-Clark Corporation
$
(33
)
 
$
119

 
$
181

 
$
649


(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.
Other (income) and expense, net in 2019 includes a pre-tax gain of approximately $182 on the sale of a manufacturing facility and associated real estate which were disposed of as part of the restructuring.
The following summarizes the restructuring liabilities activity:
 
 
2019
 
2018
Restructuring liabilities at January 1
 
$
210

 
$

Charges for workforce reductions and other cash exit costs
 
159

 
512

Cash payments
 
(230
)
 
(229
)
Currency and other
 
3

 
(20
)
Restructuring liabilities at September 30
 
$
142

 
$
263


Restructuring liabilities of $84 and $138 are recorded in Accrued expenses and other current liabilities and $58 and $125 are recorded in Other Liabilities as of September 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 September 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

9



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 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. In the third quarter of 2018, we recorded discrete net tax expense of $26 as a result of finalizing estimates related to the transition tax and remeasurement of deferred taxes.
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 September 30, 2019 (translated at the September 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 nine months ended September 30, 2019 and for the full year 2018, there were no significant transfers to or from level 3 fair value determinations.
Derivative assets and liabilities are measured on a recurring basis at fair value. At September 30, 2019 and December 31, 2018, derivative assets were $61 and $30, respectively, and derivative liabilities were $27 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 September 30, 2019 and December 31, 2018, respectively. They are not traded in active markets. As of September 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 $72 and $64 at September 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
 
 
 
 
 
 
 
 
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents(a)
1
 
$
416

 
$
416

 
$
539

 
$
539

Time deposits(b)
1
 
302

 
302

 
256

 
256

Liabilities
 
 
 
 
 
 
 
 
 
Short-term debt(c)
2
 
796

 
796

 
495

 
495

Long-term debt(d)
2
 
6,957

 
7,885

 
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
September 30
 
Nine Months Ended
September 30
(Millions of shares)
 
2019
 
2018
 
2019
 
2018
Basic
 
343.8

 
347.2

 
344.1

 
348.8

Dilutive effect of stock options and restricted share unit awards
 
2.1

 
1.6

 
1.9

 
1.6

Diluted
 
345.9

 
348.8

 
346.0

 
350.4


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 September 30, 2019 and 2018 was 343.1 million and 346.6 million, respectively.