SEC Filing | Kimberly-Clark Corporation

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kmb-20220930

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, 2022

☐ 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

KIMBERLY-CLARK CORPORATION

(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

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 18, 2022, there were 337,492,094 shares of the Corporation's common stock outstanding.

Table of Contents


PART I – FINANCIAL INFORMATION			1

Item 1. Financial Statements			1

UNAUDITED CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021			1

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021			2

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021			3

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021			4

UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021			6

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS			7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			15

Item 4. Controls and Procedures			22

PART II – OTHER INFORMATION			23



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			23

Item 6. Exhibits			24

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)	2022		2021		2022		2021
Net Sales	$	5,053	$	5,010	$	15,211	$	14,475
Cost of products sold	3,510		3,527		10,619		9,923
Gross Profit	1,543		1,483		4,592		4,552
Marketing, research and general expenses	873		819		2,665		2,488
Other (income) and expense, net	15		7		(42)		24
Operating Profit	655		657		1,969		2,040
Nonoperating expense	(18)		(10)		(49)		(71)
Interest income	4		1		7		4
Interest expense	(73)		(64)		(206)		(192)
Income Before Income Taxes and Equity Interests	568		584		1,721		1,781
Provision for income taxes	(127)		(126)		(356)		(386)
Income Before Equity Interests	441		458		1,365		1,395
Share of net income of equity companies	29		21		81		88
Net Income	470		479		1,446		1,483
Net income attributable to noncontrolling interests	(3)		(10)		(19)		(26)
Net Income Attributable to Kimberly-Clark Corporation	$	467	$	469	$	1,427	$	1,457

Per Share Basis
Net Income Attributable to Kimberly-Clark Corporation
Basic	$	1.38	$	1.39	$	4.23	$	4.32
Diluted	$	1.38	$	1.39	$	4.22	$	4.31

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30				Nine Months Ended September 30
(Millions of dollars)	2022		2021		2022		2021
Net Income	$	470	$	479	$	1,446	$	1,483
Other Comprehensive Income (Loss), Net of Tax
Unrealized currency translation adjustments	(316)		(151)		(530)		(288)
Employee postretirement benefits	20		16		36		45
Other	45		35		79		93
Total Other Comprehensive Income (Loss), Net of Tax	(251)		(100)		(415)		(150)
Comprehensive Income	219		379		1,031		1,333
Comprehensive (income) loss attributable to noncontrolling interests	9		1		7		(8)
Comprehensive Income Attributable to Kimberly-Clark Corporation	$	228	$	380	$	1,038	$	1,325

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(2022 Data is Unaudited)


(Millions of dollars)	September 30, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	362	$	270
Accounts receivable, net	2,333		2,207
Inventories	2,281		2,239
Other current assets	649		849
Total Current Assets	5,625		5,565
Property, Plant and Equipment, Net	7,737		8,097
Investments in Equity Companies	266		290
Goodwill	2,043		1,840
Other Intangible Assets, Net	866		810
Other Assets	1,299		1,235
TOTAL ASSETS	$	17,836	$	17,837

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year	$	959	$	433
Trade accounts payable	3,660		3,840
Accrued expenses and other current liabilities	2,190		2,096
Dividends payable	388		380
Total Current Liabilities	7,197		6,749
Long-Term Debt	7,628		8,141
Noncurrent Employee Benefits	837		809
Deferred Income Taxes	636		694
Other Liabilities	695		681
Redeemable Common and Preferred Securities of Subsidiaries	260		26
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, 2022 and December 31, 2021	473		473
Additional paid-in capital	633		605
Common stock held in treasury, at cost - 41.1 and 41.8 million shares at September 30, 2022 and December 31, 2021, respectively	(5,126)		(5,183)
Retained earnings	8,086		7,858
Accumulated other comprehensive income (loss)	(3,629)		(3,239)
Total Kimberly-Clark Corporation Stockholders' Equity	437		514
Noncontrolling Interests	146		223
Total Stockholders' Equity	583		737
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,836	$	17,837

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Three Months Ended September 30, 2022
(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, 2022	378,597	$	473	$	598	40,962	$	(5,111)	$	8,022	$	(3,389)	$	149	$	742
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		467		—		9		476
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		(239)		(13)		(252)
Stock-based awards exercised or vested	—	—		(2)		(84)	9		—		—		—		7
Shares repurchased	—	—		—		191	(25)		—		—		—		(25)
Recognition of stock-based compensation	—	—		31		—	—		—		—		—		31
Dividends declared ($1.16 per share)	—	—		—		—	—		(391)		—		(1)		(392)
Other	—	—		6		—	1		(12)		(1)		2		(4)
Balance at September 30, 2022	378,597	$	473	$	633	41,069	$	(5,126)	$	8,086	$	(3,629)	$	146	$	583


	Nine Months Ended September 30, 2022
(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, 2021	378,597	$	473	$	605	41,762	$	(5,183)	$	7,858	$	(3,239)	$	223	$	737
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		1,427		—		30		1,457
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		(389)		(26)		(415)
Stock-based awards exercised or vested	—	—		(81)		(1,272)	131		—		—		—		50
Shares repurchased	—	—		—		579	(75)		—		—		—		(75)
Recognition of stock-based compensation	—	—		98		—	—		—		—		—		98
Dividends declared ($3.48 per share)	—	—		—		—	—		(1,174)		—		(82)		(1,256)
Other	—	—		11		—	1		(25)		(1)		1		(13)
Balance at September 30, 2022	378,597	$	473	$	633	41,069	$	(5,126)	$	8,086	$	(3,629)	$	146	$	583

See notes to the unaudited interim consolidated financial statements.


	Three Months Ended September 30, 2021
(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, 2021	378,597	$	473	$	627	41,661	$	(5,159)	$	7,798	$	(3,215)	$	234	$	758
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		469		—		10		479
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		(89)		(11)		(100)
Stock-based awards exercised or vested	—	—		(1)		(237)	26		—		—		—		25
Shares repurchased	—	—		—		429	(58)		—		—		—		(58)
Recognition of stock-based compensation	—	—		(13)		—	—		—		—		—		(13)
Dividends declared ($1.14 per share)	—	—		—		—	—		(384)		—		—		(384)
Other	—	—		1		—	—		—		(1)		—		—
Balance at September 30, 2021	378,597	$	473	$	614	41,853	$	(5,191)	$	7,883	$	(3,305)	$	233	$	707


	Nine Months Ended September 30, 2021
(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, 2020	378,597	$	473	$	657	39,873	$	(4,899)	$	7,567	$	(3,172)	$	243	$	869
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		1,457		—		25		1,482
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		(132)		(18)		(150)
Stock-based awards exercised or vested	—	—		(78)		(1,189)	130		—		—		—		52
Shares repurchased	—	—		—		3,169	(422)		—		—		—		(422)
Recognition of stock-based compensation	—	—		28		—	—		—		—		—		28
Dividends declared ($3.42 per share)	—	—		—		—	—		(1,154)		—		(17)		(1,171)
Other	—	—		7		—	—		13		(1)		—		19
Balance at September 30, 2021	378,597	$	473	$	614	41,853	$	(5,191)	$	7,883	$	(3,305)	$	233	$	707

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)


	Nine Months Ended September 30
(Millions of dollars)	2022		2021
Operating Activities
Net income	$	1,446	$	1,483
Depreciation and amortization	568		572
Asset impairments	—		3
Gain on previously held equity investment in Thinx	(85)		—
Stock-based compensation	101		30
Deferred income taxes	(131)		(42)
Net (gains) losses on asset dispositions	14		34
Equity companies' earnings (in excess of) less than dividends paid	(21)		(25)
Operating working capital	(166)		(432)
Postretirement benefits	6		39
Other	10		6
Cash Provided by Operations	1,742		1,668
Investing Activities
Capital spending	(679)		(734)
Acquisition of business, net of cash acquired	(46)		—
Proceeds from dispositions of property	7		31
Investments in time deposits	(411)		(632)
Maturities of time deposits	632		598
Other	(20)		1
Cash Used for Investing	(517)		(736)
Financing Activities
Cash dividends paid	(1,167)		(1,133)
Change in short-term debt	487		854
Debt proceeds	—		5
Debt repayments	(312)		(269)
Proceeds from exercise of stock options	84		52
Acquisitions of common stock for the treasury	(74)		(393)
Cash dividends paid to noncontrolling interests	(82)		(17)
Other	(45)		(40)
Cash Used for Financing	(1,109)		(941)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(24)		(8)
Change in Cash and Cash Equivalents	92		(17)
Cash and Cash Equivalents - Beginning of Period	270		303
Cash and Cash Equivalents - End of Period	$	362	$	286

See notes to the unaudited interim consolidated financial statements.

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, 2021. The terms "Corporation," "Kimberly-Clark," "K-C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.

Highly Inflationary Accounting

GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. Under highly inflationary accounting, the countries’ functional currency becomes the U.S. dollar, and its income statement and balance sheet are measured in U.S. dollars using both current and historical rates of exchange. 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”). 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, 2022, 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, 2022 and 2021.

In the first quarter of 2022, published inflation indices indicated that the three-year cumulative inflation in Turkey exceeded 100 percent, and as of April 1, 2022, we elected to adopt highly inflationary accounting for our subsidiary in Turkey (“K-C Turkey”). The effect of changes in exchange rates on lira-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material. As of September 30, 2022, K-C Turkey had a small net lira monetary position. Net sales of K-C Turkey were less than 1 percent of our consolidated net sales for the nine months ended September 30, 2022.

Recently Issued Accounting Standard

In September 2022, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50). The new guidance requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of the financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the provision on roll forward information, which is effective for fiscal years beginning after December 15, 2023. As the guidance requires only additional disclosures, the effects of this standard on our financial position, results of operations and cash flows are not expected to be material.

Note 2. 2022 Acquisition

On February 24, 2022, we completed our acquisition of a majority and controlling share of Thinx Inc. (“Thinx”), an industry leader in the reusable period and incontinence underwear category, for total consideration of $181 consisting of cash of $53, the fair value of our previously held equity investment of $127, and certain share-based award costs of $1.

We previously accounted for our ownership interest in Thinx as an equity method investment, but upon increasing our ownership to 58%, we began consolidating the operations of Thinx into our financial statements at the end of the first quarter of 2022. The consolidated results of operations for Thinx are reported in our Personal Care business segment on a one-month lag. The share of Thinx net income and equity attributable to the third-party minority owner of Thinx is classified in our consolidated income statement within Net income attributable to noncontrolling interests and in our consolidated balance sheet within Redeemable Common and Preferred Securities of Subsidiaries. This noncontrolling equity interest is measured at the estimated redemption value, which approximates fair value.

We have substantially completed an initial purchase price allocation in which we utilized several generally accepted valuation methodologies to estimate the fair value of certain acquired assets. The primary valuation methods included two forms of the Income Approach (i.e., the multi-period excess earnings method [distributor method] and the relief-from-royalty method). These valuation methodologies are commonly used to value similar identifiable intangible assets in the Consumer Packaged Goods industry. All of the selected valuation methodologies incorporate unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy in Accounting Standard Codification 820, Fair Value Measurements. In connection with these valuation methodologies, we are required to make estimates and assumptions regarding market comparable companies, revenue growth rates, operating margins, distributor and customer attrition rates, royalty rates, distributor margins, discount rates, etc., which are primarily based on cash flow forecasts, business plans, economic projections and other information available to market participants.

The total purchase price consideration was allocated to the net assets acquired based upon their respective estimated fair values as follows:





Current Assets	$	28
Property, Plant and Equipment, Net	2
Goodwill	297
Other Intangible Assets, Net	123
Other Assets	4
Current Liabilities	(17)
Deferred Income Taxes	(18)
Other Liabilities	(4)
Fair value of net assets acquired	415

Less fair value of non-controlling interest	(234)
Total purchase price consideration	$	181

Other Intangible Assets, Net includes brands and customer relationships which have estimated useful lives of 4 to 15 years, primarily 15 years. Based on the carrying value of these finite-lived assets as of September 30, 2022, amortization expense per year for each of the next five years is estimated to be approximately $8.

Goodwill of $297 was allocated to the Personal Care business segment. The goodwill is primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. For tax purposes, the acquisition of additional Thinx shares was treated as a stock acquisition, and the goodwill acquired is not tax deductible.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above. We continue to evaluate potential contingencies that may have existed as of the acquisition date and expect to finalize the purchase price allocation no later than the first quarter of 2023.

As a result of this transaction during the quarter ended March 31, 2022, an $85 non-recurring, non-cash gain was recognized in Other (income) expense, net as a result of the remeasurement of the carrying value of our previously held equity investment to fair value, and related transaction and integration costs of $21 were recorded in Marketing, research and general expenses. This recognition resulted in a net benefit of $64 pre-tax ($68 after tax) being included in our consolidated income statement for the quarter ended March 31, 2022. In addition, we removed the non-cash gain impact from Operating Activities in our consolidated cash flow statements for the nine months ended September 30, 2022.

Pro forma results of operations have not been presented as the impact on our consolidated financial statements is not material.

Note 3. 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, 2022 and for the full year 2021, 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, 2022 and December 31, 2021, derivative assets were $283 and $65, respectively, and derivative liabilities were $131 and $41, 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 commodity 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 6.

Redeemable common and preferred securities of subsidiaries are measured on a recurring basis at their estimated redemption values, which approximate fair value. As of September 30, 2022 and December 31, 2021, the securities were valued at $260 and $26, respectively. No redeemable common securities were outstanding at December 31, 2021. The securities are not traded in active markets, and their measurement is considered a level 3 measurement.

Company-owned life insurance ("COLI") assets are measured on a recurring basis at fair value. COLI assets were $63 and $72 at September 30, 2022 and December 31, 2021, 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.

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, 2022				December 31, 2021
Assets
Cash and cash equivalents(a)	1	$	362	$	362	$	270	$	270
Time deposits(b)	1	168		168		416		416

Liabilities
Short-term debt(c)	2	599		599		118		118

Long-term debt(d)	2	7,988		7,269		8,456		9,492

(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 4. 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)	2022	2021	2022	2021
Basic	337.6	336.8	337.3	337.4
Dilutive effect of stock options and restricted share unit awards	0.7	0.7	1.0	1.0
Diluted	338.3	337.5	338.3	338.4

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, 2022 and 2021 was 337.5 million and 336.7 million, respectively.

Note 5. 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 nine months ended September 30, 2022 was primarily due to the weakening of certain foreign currencies versus the U.S. dollar.

The changes in the components of AOCI attributable to Kimberly-Clark, net of tax, are as follows:


	Unrealized Translation		Defined Benefit Pension Plans			Other Postretirement Benefit Plans			Cash Flow Hedges and Other
Balance as of December 31, 2020	$	(2,157)	$	(912)		$	(40)		$	(63)
Other comprehensive income (loss) before reclassifications	(266)		5			(12)			56
(Income) loss reclassified from AOCI	—		52		(a)	(3)		(a)	35
Net current period other comprehensive income (loss)	(266)		57			(15)			91

Balance as of September 30, 2021	$	(2,423)	$	(855)		$	(55)		$	28

Balance as of December 31, 2021	$	(2,422)	$	(803)		$	(34)		$	20
Other comprehensive income (loss) before reclassifications	(501)		(6)			(2)			101
(Income) loss reclassified from AOCI	—		44		(a)	—		(a)	(26)
Net current period other comprehensive income (loss)	(501)		38			(2)			75

Balance as of September 30, 2022	$	(2,923)	$	(765)		$	(36)		$	95

(a) Included in computation of net periodic benefit costs.

Note 6. Objectives and Strategies for Using Derivatives

As a multinational enterprise, we are exposed to financial risks, such as changes in foreign currency exchange rates, interest rates, and commodity prices. We employ a number of practices to manage these risks, including operating and financing activities and, where appropriate, the use of derivative instruments.

At September 30, 2022 and December 31, 2021, derivative assets were $283 and $65, respectively, and derivative liabilities were $131 and $41, respectively, primarily comprised of foreign currency exchange contracts. Derivative assets are recorded in

Other current assets or Other Assets, as appropriate, and derivative liabilities are recorded in Accrued expenses and other current liabilities or Other Liabilities, as appropriate.

Foreign Currency Exchange Rate Risk

Translation adjustments result from translating foreign entities' financial statements into U.S. dollars from their functional currencies. The risk to any particular entity's net assets is reduced to the extent that the entity is financed with local currency borrowings. A portion of our balance sheet translation exposure for certain affiliates, which results from changes in translation rates between the affiliates’ functional currencies and the U.S. dollar, is hedged with cross-currency swap contracts and certain foreign denominated debt which are designated as net investment hedges. The foreign currency exposure on certain non-functional currency denominated monetary assets and liabilities, primarily intercompany loans and accounts payable, is hedged with primarily undesignated derivative instruments.

Derivative instruments are entered into to hedge a portion of forecasted cash flows denominated in foreign currencies for non-U.S. operations' purchases of raw materials, which are priced in U.S. dollars, and imports of intercompany finished goods and work-in-process priced predominantly in U.S. dollars and euros. The derivative instruments used to manage these exposures are designated as cash flow hedges.

Interest Rate Risk

Interest rate risk is managed using a portfolio of variable and fixed-rate debt composed of short and long-term instruments. Interest rate swap contracts may be used to facilitate the maintenance of the desired ratio of variable and fixed-rate debt and are designated as fair value hedges. From time to time, we also hedge the anticipated issuance of fixed-rate debt, and these contracts are designated as cash flow hedges.

Commodity Price Risk

We use derivative instruments, such as forward contracts, to hedge a limited portion of our exposure to market risk arising from changes in prices of certain commodities. These derivatives are designated as cash flow hedges of specific quantities of the underlying commodity expected to be purchased in future months. In addition, we utilize negotiated contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs.

Fair Value Hedges

Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk. The fair values of these interest rate derivative instruments are recorded as an asset or liability, as appropriate, with the offset recorded in Interest expense. The offset to the change in fair values of the related debt is also recorded in Interest expense. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to Interest expense over the life of the related debt. As of September 30, 2022, the aggregate notional values and carrying values of debt subject to outstanding interest rate contracts designated as fair value hedges were $525 and $465, respectively. For the nine months ended September 30, 2022 and 2021, gains or losses recognized in Interest expense for interest rate swaps were not significant.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is initially recorded in AOCI, net of related income taxes, and recognized in earnings in the same income statement line and period that the hedged exposure affects earnings. As of September 30, 2022, outstanding commodity forward contracts were in place to hedge a limited portion of our estimated requirements of the related underlying commodities in the remainder of 2022 and future periods. During 2022, we increased the notional level of our foreign currency designated cash flow hedges to help mitigate the impacts of significantly increased macroeconomic foreign currency rate fluctuations, and as of September 30, 2022, the aggregate notional value of outstanding foreign exchange derivative contracts designated as cash flow hedges was $2,106. For the nine months ended September 30, 2022 and 2021, no significant gains or losses were reclassified into Interest expense, Cost of products sold or Other (income) and expense, net as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At September 30, 2022, amounts to be reclassified from AOCI into Interest expense, Cost of products sold or Other (income) and expense, net during the next twelve months are not expected to be material. The maximum maturity of cash flow hedges in place at September 30, 2022 is September 2025.

Net Investment Hedges

For derivative instruments that are designated and qualify as net investment hedges, the aggregate notional value was $1.3 billion at September 30, 2022. We exclude the interest accruals on cross-currency swap contracts and the forward points on foreign exchange forward contracts from the assessment and measurement of hedge effectiveness. We recognize the interest accruals on cross-currency swap contracts in earnings within Interest expense. We amortize the forward points on foreign exchange contracts into earnings within Interest expense over the life of the hedging relationship. Changes in fair value of net investment hedges are recorded in AOCI and offset the change in the value of the net investment being hedged. For the nine

months ended September 30, 2022, unrealized gains of $176 related to net investment hedge fair value changes were recorded in AOCI and no significant amounts were reclassified from AOCI to Interest expense.

No significant amounts were excluded from the assessment of net investment, fair value or cash flow hedge effectiveness as of September 30, 2022.

Undesignated Hedging Instruments

Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in Other (income) and expense, net. Losses of $13 and $2 were recorded in the three months ended September 30, 2022 and 2021, respectively. Losses of $48 and $8 were recorded in the nine months ended September 30, 2022 and 2021, respectively. The effect on earnings from the use of these non-designated derivatives is substantially neutralized by the transactional gains and losses recorded on the underlying assets and liabilities. At September 30, 2022, the notional value of these undesignated derivative instruments was approximately $2.1 billion.

Note 7. Business Segment Information

We are organized into operating segments based on product groupings. These operating segments have been aggregated into three reportable global business segments: Personal Care, Consumer Tissue and K-C Professional. The reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes Other (income) and expense, net and income and expense not associated with ongoing operations of the business segments, including the costs of corporate decisions related to the 2018 Global Restructuring Program which was completed in 2021.

The principal sources of revenue in each global business segment are described below:

•Personal Care brands offer our consumers a trusted partner in caring for themselves and their families by delivering confidence, protection and discretion through a wide variety of innovative solutions and products such as disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, reusable underwear and other related products. Products in this segment are sold under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Thinx, Depend, Plenitud, Softex, Poise and other brand names.

•Consumer Tissue offers a wide variety of innovative solutions and trusted brands that responsibly improve everyday living for families around the world. Products in this segment include facial and bathroom tissue, paper towels, napkins and related products, and are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve and other brand names.

•K-C Professional partners with businesses to create Exceptional Workplaces, helping to make them healthier, safer and more productive through a range of solutions and supporting products such as wipers, tissue, towels, apparel, soaps and sanitizers. Our brands, including Kleenex, Scott, WypAll, Kimtech and KleenGuard are well known for quality and trusted to help people around the world work better.

Information concerning consolidated operations by business segment is presented in the following tables:


	Three Months Ended September 30						Nine Months Ended September 30
	2022		2021		Change		2022		2021		Change
NET SALES
Personal Care	$	2,628	$	2,656	-1	%	$	8,067	$	7,635	+6	%
Consumer Tissue	1,578		1,541		+2	%	4,683		4,475		+5	%
K-C Professional	836		797		+5	%	2,418		2,314		+4	%
Corporate & Other	11		16		N.M.		43		51		N.M.
TOTAL NET SALES	$	5,053	$	5,010	+1	%	$	15,211	$	14,475	+5	%

OPERATING PROFIT
Personal Care	$	423	$	496	-15	%	$	1,364	$	1,431	-5	%
Consumer Tissue	218		222		-2	%	567		687		-17	%
K-C Professional	119		96		+24	%	294		332		-11	%
Corporate & Other(a)	(90)		(150)		N.M.		(298)		(386)		N.M.
Other (income) and expense, net(a)