Quarterly Report (10-q)

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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, 2021

☐ 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 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

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, 2021, there were 336,716,722 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 SE PTEMBER 30, 2021 AND 2020			1

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020			2

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020			3

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020			4

UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020			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			23

PART II – OTHER INFORMATION			24



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			24

Item 6. Exhibits			25

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)	2021		2020		2021		2020
Net Sales	$	5,010	$	4,683	$	14,475	$	14,304
Cost of products sold	3,527		3,093		9,923		9,146
Gross Profit	1,483		1,590		4,552		5,158
Marketing, research and general expenses	819		919		2,488		2,636
Other (income) and expense, net	7		5		24		27
Operating Profit	657		666		2,040		2,495
Nonoperating expense	(10)		(40)		(71)		(57)
Interest income	1		2		4		6
Interest expense	(64)		(62)		(192)		(188)
Income Before Income Taxes and Equity Interests	584		566		1,781		2,256
Provision for income taxes	(126)		(114)		(386)		(510)
Income Before Equity Interests	458		452		1,395		1,746
Share of net income of equity companies	21		31		88		104
Net Income	479		483		1,483		1,850
Net income attributable to noncontrolling interests	(10)		(11)		(26)		(37)
Net Income Attributable to Kimberly-Clark Corporation	$	469	$	472	$	1,457	$	1,813

Per Share Basis
Net Income Attributable to Kimberly-Clark Corporation
Basic	$	1.39	$	1.38	$	4.32	$	5.32
Diluted	$	1.39	$	1.38	$	4.31	$	5.30

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)	2021		2020		2021		2020
Net Income	$	479	$	483	$	1,483	$	1,850
Other Comprehensive Income (Loss), Net of Tax
Unrealized currency translation adjustments	(151)		38		(288)		(236)
Employee postretirement benefits	16		—		45		39
Other	35		(3)		93		5
Total Other Comprehensive Income (Loss), Net of Tax	(100)		35		(150)		(192)
Comprehensive Income	379		518		1,333		1,658
Comprehensive (income) loss attributable to noncontrolling interests	1		(16)		(8)		(34)
Comprehensive Income Attributable to Kimberly-Clark Corporation	$	380	$	502	$	1,325	$	1,624

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(2021 Data is Unaudited)


(Millions of dollars)	September 30, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	286	$	303
Accounts receivable, net	2,399		2,235
Inventories	2,098		1,903
Other current assets	843		733
Total Current Assets	5,626		5,174
Property, Plant and Equipment, Net	7,964		8,042
Investments in Equity Companies	340		300
Goodwill	1,796		1,895
Other Intangible Assets, Net	810		832
Other Assets	1,239		1,280
TOTAL ASSETS	$	17,775	$	17,523

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year	$	1,387	$	486
Trade accounts payable	3,519		3,336
Accrued expenses and other current liabilities	1,972		2,262
Dividends payable	380		359
Total Current Liabilities	7,258		6,443
Long-Term Debt	7,555		7,878
Noncurrent Employee Benefits	869		864
Deferred Income Taxes	701		723
Other Liabilities	657		718
Redeemable Preferred Securities of Subsidiaries	28		28
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, 2021 and December 31, 2020	473		473
Additional paid-in capital	614		657
Common stock held in treasury, at cost - 41.9 and 39.9 million shares at September 30, 2021 and December 31, 2020, respectively	(5,191)		(4,899)
Retained earnings	7,883		7,567
Accumulated other comprehensive income (loss)	(3,305)		(3,172)
Total Kimberly-Clark Corporation Stockholders' Equity	474		626
Noncontrolling Interests	233		243
Total Stockholders' Equity	707		869
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,775	$	17,523

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, 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

See notes to the unaudited interim consolidated financial statements.


	Three Months Ended September 30, 2020
(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, 2020	378,597	$	473	$	554	37,574	$	(4,545)	$	7,299	$	(3,513)	$	227	$	495
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		472		—		10		482
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		30		6		36
Stock-based awards exercised or vested	—	—		(2)		(672)	79		—		—		—		77
Shares repurchased	—	—		—		1,280	(195)		—		—		—		(195)
Recognition of stock-based compensation	—	—		45		—	—		—		—		—		45
Dividends declared ($1.07 per share)	—	—		—		—	—		(365)		—		—		(365)
Other	—	—		13		—	—		(11)		1		(1)		2
Balance at September 30, 2020	378,597	$	473	$	610	38,182	$	(4,661)	$	7,395	$	(3,482)	$	242	$	577


	Nine Months Ended September 30, 2020
(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, 2019	378,597	$	473	$	556	37,149	$	(4,454)	$	6,686	$	(3,294)	$	227	$	194
Net income in stockholders' equity, excludes redeemable interests' share	—	—		—		—	—		1,813		—		34		1,847
Other comprehensive income, net of tax, excludes redeemable interests' share	—	—		—		—	—		—		(189)		(2)		(191)
Stock-based awards exercised or vested	—	—		(54)		(2,294)	266		—		—		—		212
Shares repurchased	—	—		—		3,327	(473)		—		—		—		(473)
Recognition of stock-based compensation	—	—		98		—	—		—		—		—		98
Dividends declared ($3.21 per share)	—	—		—		—	—		(1,095)		—		(17)		(1,112)
Other	—	—		10		—	—		(9)		1		—		2
Balance at September 30, 2020	378,597	$	473	$	610	38,182	$	(4,661)	$	7,395	$	(3,482)	$	242	$	577

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)


	Nine Months Ended September 30
(Millions of dollars)	2021		2020
Operating Activities
Net income	$	1,483	$	1,850
Depreciation and amortization	572		606
Asset impairments	3		—
Stock-based compensation	30		101
Deferred income taxes	(42)		(30)
Net (gains) losses on asset dispositions	34		67
Equity companies' earnings (in excess of) less than dividends paid	(25)		(53)
Operating working capital	(432)		292
Postretirement benefits	39		7
Other	6		2
Cash Provided by Operations	1,668		2,842
Investing Activities
Capital spending	(734)		(894)
Proceeds from dispositions of property	31		5
Investments in time deposits	(632)		(509)
Maturities of time deposits	598		404
Other	1		17
Cash Used for Investing	(736)		(977)
Financing Activities
Cash dividends paid	(1,133)		(1,087)
Change in short-term debt	854		(497)
Debt proceeds	5		1,842
Debt repayments	(269)		(753)
Proceeds from exercise of stock options	52		212
Acquisitions of common stock for the treasury	(393)		(449)
Other	(57)		(40)
Cash Used for Financing	(941)		(772)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(8)		(17)
Change in Cash and Cash Equivalents	(17)		1,076
Cash and Cash Equivalents - Beginning of Period	303		442
Cash and Cash Equivalents - End of Period	$	286	$	1,518

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, 2020. 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 September 30, 2021, 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, 2021 and 2020.

Recently Adopted Accounting Standard

In 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period. We adopted this standard as of January 1, 2021 on either a prospective basis or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to retained earnings as the amount was not material. The effects of this standard on our financial position, results of operations and cash flows were not 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 11 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 restructuring is expected to impact our organizations in all major geographies. Workforce reductions are expected to be in the range of 6,300 to 6,400.

The restructuring is expected to be completed in 2021, with total costs now anticipated to be in the range of $2.1 billion to $2.2 billion pre-tax ($1.6 billion to $1.7 billion after tax). Cash costs are expected to be $1.15 billion to $1.2 billion, primarily related to workforce reductions. Non-cash charges are expected to be $950 to $1.0 billion pre-tax and will primarily consist of incremental depreciation, asset write-offs and pension settlement and curtailment charges. Restructuring charges in 2021 are now expected to be $280 to $380 pre-tax ($225 to $300 after tax).

The following net charges were incurred in connection with the 2018 Global Restructuring Program:


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Cost of products sold:
Charges (adjustments) for workforce reductions	$	5	$	15	$	3	$	16
Asset impairments	—		—		3		—
Asset write-offs	14		50		15		59
Incremental depreciation	2		18		10		86
Other exit costs	27		24		67		76
Total	48		107		98		237
Marketing, research and general expenses:
Charges (adjustments) for workforce reductions	16		1		30		(1)
Other exit costs	23		24		48		76
Total	39		25		78		75
Other (income) and expense, net	1		(1)		9		(1)
Nonoperating expense	9		26		65		26
Total charges	97		157		250		337
Provision for income taxes	(16)		(50)		(48)		(83)
Net charges	81		107		202		254
Net impact related to equity companies and noncontrolling interests	(2)		—		(3)		(1)
Net charges attributable to Kimberly-Clark Corporation	$	79	$	107	$	199	$	253

The following summarizes the restructuring liabilities activity:


	2021		2020
Restructuring liabilities at January 1	$	94	$	132
Charges for workforce reductions and other cash exit costs	145		162
Cash payments	(171)		(177)
Currency and other	(3)		(3)
Restructuring liabilities at September 30	$	65	$	114

Restructuring liabilities of $48 and $80 are recorded in Accrued expenses and other current liabilities and $17 and $34 are recorded in Other Liabilities as of September 30, 2021 and 2020, 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, 2021, cumulative pre-tax charges for the 2018 Global Restructuring Program were $2.1 billion ($1.6 billion after tax).

Note 3. 2020 Acquisition

On October 1, 2020 (“Acquisition Date”), we acquired Softex Indonesia, in an all-cash transaction for approximately $1.2 billion. The transaction price, subject to working capital and net debt adjustments, resulted in a preliminary purchase price of $1.1 billion as of December 31, 2020 in addition to the assumption of certain indebtedness of Softex Indonesia at closing. The allocation of purchase consideration related to Softex Indonesia was substantially completed in the fourth quarter of 2020. 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 fourth quarter of 2021.

See Note 3, Acquisition, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for the preliminary purchase price allocation, valuation methodology, and other information related to the Softex Indonesia acquisition.

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, 2021 and for the full year 2020, 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, 2021 and December 31, 2020, derivative assets were $79 and $44, respectively, and derivative liabilities were $39 and $92, 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 7.

Redeemable preferred securities of subsidiaries are measured on a recurring basis at fair value and were $28 as of September 30, 2021 and December 31, 2020, respectively. They are not traded in active markets. 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 $73 at September 30, 2021 and December 31, 2020, 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, 2021				December 31, 2020
Assets
Cash and cash equivalents(a)	1	$	286	$	286	$	303	$	303
Time deposits(b)	1	368		368		364		364

Liabilities
Short-term debt(c)	2	1,072		1,072		223		223

Long-term debt(d)	2	7,870		8,968		8,141		9,627

(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)	2021	2020	2021	2020
Basic	336.8	341.0	337.4	341.1
Dilutive effect of stock options and restricted share unit awards	0.7	1.3	1.0	1.2
Diluted	337.5	342.3	338.4	342.3

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 September 30, 2021 and 2020 was 336.7 million and 340.4 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 nine months ended September 30, 2021 was primarily due to the weakening of foreign currencies versus the U.S. dollar, particularly the Korean won, the euro, the Australian dollar and the Peruvian sol.

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, 2019	$	(2,271)	$	(979)		$	(13)		$	(31)
Other comprehensive income (loss) before reclassifications	(233)		(19)			3			15
(Income) loss reclassified from AOCI	—		57		(a)	(1)		(a)	(10)
Net current period other comprehensive income (loss)	(233)		38			2			5

Balance as of September 30, 2020	$	(2,504)	$	(941)		$	(11)		$	(26)

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

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

Note 7. 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, 2021 and December 31, 2020, derivative assets were $79 and $44, respectively, and derivative liabilities were $39 and $92, 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 short-term contract structures, including fixed price contracts, 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, 2021, the aggregate notional values and carrying values of debt subject to outstanding interest rate contracts designated as fair value hedges were $625 and $638, respectively. For the nine months ended September 30, 2021 and 2020, 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, 2021, 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 2021 and future periods. As of September 30, 2021, the aggregate notional value of outstanding foreign exchange derivative contracts designated as cash flow hedges was $709. For the nine months ended September 30, 2021 and 2020, 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, 2021, 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, 2021 is September 2023.

Net Investment Hedges

For derivative instruments that are designated and qualify as net investment hedges, the aggregate notional value was $1.5 billion at September 30, 2021. 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, 2021, unrealized gains of $69 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, 2021.

Undesignated Hedging Instruments

Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in Other (income) and expense, net. A loss of $2 and a gain of $23 were recorded in the three months ended September 30, 2021 and 2020, respectively. A loss of $8 and a gain of $31 were recorded in the nine months ended September 30, 2021 and 2020. 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, 2021, the notional value of these undesignated derivative instruments was approximately $2.1 billion.

Note 8. 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 described in Note 2.

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, 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, 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
	2021		2020		Change		2021		2020		Change
NET SALES
Personal Care	$	2,656	$	2,339	+14	%	$	7,635	$	6,990	+9	%
Consumer Tissue	1,541		1,623		-5	%	4,475		4,991		-10	%
K-C Professional	797		705		+13	%	2,314		2,277		+2	%
Corporate & Other	16		16		N.M.		51		46		N.M.
TOTAL NET SALES	$	5,010	$	4,683	+7	%	$	14,475	$	14,304	+1	%

OPERATING PROFIT
Personal Care	$	496	$	486	+2	%	$	1,431	$	1,532	-7	%
Consumer Tissue	222		318		-30	%	687		1,111		-38	%
K-C Professional	96		87		+10	%	332		423		-22	%
Corporate & Other(a)	(150)		(220)		N.M.		(386)		(544)		N.M.
Other (income) and expense, net(a)	7		5		+40	%	24		27		-11	%
TOTAL OPERATING PROFIT	$	657	$	666	-1	%	$	2,040	$	2,495	-18	%

(a) Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including charges related to the 2018 Global Restructuring Program and Softex Indonesia acquisition-related costs. Restructuring charges related to the Personal Care, Consumer Tissue and K-C Professional business segments were $32, $42 and $10, respectively, for the three months ended September 30, 2021, $57, $59, and $15, respectively, for the three months ended September 30, 2020, $71, $84 and $19, respectively, for the nine months ended September 30, 2021, and $131, $135 and $41, respectively for the nine months ended September 30, 2020 .

N.M. - Not Meaningful

Sales of Principal Products:


	Three Months Ended September 30				Nine Months Ended September 30
(Billions of dollars)	2021		2020		2021		2020
Baby and child care products	1.8		1.6		5.3		4.8
Consumer tissue products	1.5		1.6		4.5		5.0
Away-from-home professional products	0.8		0.7		2.3		2.3
All other	0.9		0.8		2.4		2.2
Consolidated	$	5.0	$	4.7	$	14.5	$	14.3

Note 9. Supplemental Balance Sheet Data

The following schedule presents a summary of inventories by major class:


	September 30, 2021						December 31, 2020
	LIFO		Non-LIFO		Total		LIFO		Non-LIFO		Total
Raw materials	$	141	$	342	$	483	$	131	$	263	$	394
Work in process	143		91		234		103		86		189
Finished goods	545		776		1,321		453		749		1,202
Supplies and other	—		276		276		—		263		263
	829		1,485		2,314		687		1,361		2,048
Excess of FIFO or weighted-average cost over LIFO cost	(216)		—		(216)		(145)		—		(145)
Total	$	613	$	1,485	$	2,098	$	542	$	1,361	$	1,903

Inventories are valued at the lower of cost or net realizable value, determined on the FIFO or weighted-average cost methods, and at the lower of cost or market, determined on the LIFO cost method.

The following schedule presents a summary of property, plant and equipment, net:


	September 30, 2021		December 31, 2020
Land	$	169	$	174
Buildings	2,959		2,932
Machinery and equipment	14,514		14,382
Construction in progress	700		845
	18,342		18,333
Less accumulated depreciation	(10,378)		(10,291)
Total	$	7,964	$	8,042

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

Introduction

This management's discussion and analysis ("MD&A") of financial condition and results of operations is intended to provide investors with an understanding of our recent performance, financial condition and prospects. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted. The following will be discussed and analyzed:

•Overview of Third Quarter 2021 Results

•Impact of COVID-19

•Results of Operations and Related Information

•Liquidity and Capital Resources

•Information Concerning Forward-Looking Statements

We describe our business outside North America in two groups – Developing and Emerging Markets ("D&E") and Developed Markets. D&E markets comprise Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Developed Markets consist of Western and Central Europe, Australia and South Korea. We have three reportable business segments: Personal Care, Consumer Tissue and K-C Professional. These business segments are described in greater detail in Note 8 to the unaudited interim consolidated financial statements.

This section presents a discussion and analysis of our third quarter 2021 net sales, operating profit and other information relevant to an understanding of the results of operations. In addition, we provide commentary regarding organic sales growth, which describes the impact of changes in volume, net selling prices and product mix on net sales. Change in foreign currency exchange rates, acquisitions and exited businesses also impact the year-over-year change in net sales. Our analysis compares the three and nine months ended September 30, 2021 results to the same periods in 2020.

Throughout this MD&A, we refer to financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures. These measures include adjusted gross and operating profit, adjusted net income, adjusted earnings per share, adjusted other (income) and expense, net and adjusted effective tax rate. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight into some of the financial measures used to evaluate management.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, and they should be read only in conjunction with our unaudited interim consolidated financial statements prepared in accordance with GAAP. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items being excluded. We compensate for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures.

The non-GAAP financial measures exclude the following items for the relevant time periods as indicated in the reconciliations included later in this MD&A:

•2018 Global Restructuring Program – In 2018, we initiated this restructuring program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. See Item 1, Note 2 to the unaudited interim consolidated financial statements for details.

•Acquisition-Related Costs – In the third quarter of 2020, we incurred one-time transaction and integration costs associated with the acquisition of Softex Indonesia. See Item 1, Note 3 to the unaudited interim consolidated financial statements for details.

Overview of Third Quarter 2021 Results

•Net sales of $5.0 billion increased 7 percent compared to the year-ago period, including an organic sales increase of 4 percent.

•Operating profit was $657 in 2021 and $666 in 2020. Net Income Attributable to Kimberly-Clark Corporation was $469 in 2021 compared to $472 in 2020, and diluted earnings per share were $1.39 in 2021 compared to $1.38 in 2020. Results in 2021 and 2020 include charges related to the 2018 Global Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia.

Impact of COVID-19

We continue to actively address the COVID-19 situation and its impact globally. We believe that we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and severity of this global pandemic or its ultimate impact on the global economy and our business and results.

We have experienced increased volatility in demand for some of our products as consumers adapt to the evolving environment. Throughout 2020, we experienced a high level of demand in our Consumer Tissue business segment across several major geographies, particularly the U.S., as consumers increased home inventory levels in response to COVID-19. The demand increase was followed by a period of demand softness in the first nine months of 2021 as consumers used existing home inventories and retailers lowered their inventory levels. Our K-C Professional business experienced volume declines during 2020 and the first six months of 2021 reflecting the reduction in away from home demand, particularly for our washroom tissue products.

During 2020 and the first nine months of 2021, we experienced temporary closures of certain facilities and reductions in capacity related to COVID-19. We continue to experience ongoing incidents of supply chain disruption related to the continuing impact of COVID-19 on employees, labor shortages, raw material supply and transportation challenges, particularly in markets where COVID-19 case levels are elevated.

During 2020 and the first nine months of 2021, we also experienced increased volatility in foreign currency exchange rates and commodity prices. The global pandemic disrupted supply and demand dynamics in commodity markets. In 2020, we experienced modest commodity deflation and in the first nine months of 2021, we experienced record levels of commodity inflation.

Results of Operations and Related Information

This section presents a discussion and analysis of our third quarter 2021 net sales, operating profit and other information relevant to an understanding of the results of operations.

Consolidated


Selected Financial Results	Three Months Ended September 30						Nine Months Ended September 30
	2021		2020		Percent Change		2021		2020		Percent Change
Net Sales:
North America	$	2,692	$	2,562	+5	%	$	7,436	$	7,786	-4	%
Outside North America	2,399		2,188		+10	%	7,274		6,724		+8	%
Intergeographic sales	(81)		(67)		+21	%	(235)		(206)		+14	%
Total Net Sales	5,010		4,683		+7	%	14,475		14,304		+1	%
Operating Profit:
North America	564		626		-10	%	1,561		2,054		-24	%
Outside North America	250		265		-6	%	889		1,012		-12	%
Corporate & Other(a)	(150)		(220)		N.M.		(386)		(544)		N.M.
Other (income) and expense, net(a)	7		5		+40	%	24		27		-11	%
Total Operating Profit	657		666		-1	%	2,040		2,495		-18	%



Share of net income of equity companies	21		31		-32	%	88		104		-15	%

Net Income Attributable to Kimberly-Clark Corporation	469		472		-1	%	1,457		1,813		-20	%
Diluted Earnings per Share	1.39		1.38		+1	%	4.31		5.30		-19	%

(a) Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations.

N.M. - Not Meaningful

GAAP to Non-GAAP Reconciliations of Selected Financial Results


	Three Months Ended September 30, 2021
	As Reported			2018 Global Restructuring Program		As Adjusted Non-GAAP
Cost of products sold	$	3,527		$	48	$	3,479
Gross Profit	1,483			(48)		1,531
Marketing, research and general expenses	819			39		780
Other (income) and expense, net	7			1		6
Operating Profit	657			(88)		745
Nonoperating expense	(10)			(9)		(1)
Provision for income taxes	(126)			16		(142)
Effective tax rate	21.6		%	—		20.9		%

Net income attributable to noncontrolling interests	(10)			2		(12)
Net Income Attributable to Kimberly-Clark Corporation	469			(79)		548
Diluted Earnings per Share(a)	1.39			(0.23)		1.62


	Three Months Ended September 30, 2020
	As Reported			2018 Global Restructuring Program		Softex Indonesia Acquisition-Related Costs		As Adjusted Non-GAAP
Cost of products sold	$	3,093		$	107	$	—	$	2,986
Gross Profit	1,590			(107)		—		1,697
Marketing, research and general expenses	919			25		9		885
Other (income) and expense, net	5			(1)		—		6
Operating Profit	666			(131)		(9)		806
Nonoperating expense	(40)			(26)		—		(14)
Provision for income taxes	(114)			50		—		(164)
Effective tax rate	20.1		%	—		—		22.4		%


Net Income Attributable to Kimberly-Clark Corporation	472			(107)		(9)		588
Diluted Earnings per Share(a)	1.38			(0.31)		(0.03)		1.72


	Nine Months Ended September 30, 2021
	As Reported			2018 Global Restructuring Program		As Adjusted Non-GAAP
Cost of products sold	$	9,923		$	98	$	9,825
Gross Profit	4,552			(98)		4,650
Marketing, research and general expenses	2,488			78		2,410
Other (income) and expense, net	24			9		15
Operating Profit	2,040			(185)		2,225
Nonoperating expense	(71)			(65)		(6)
Provision for income taxes	(386)			48		(434)
Effective tax rate	21.7		%	—		21.4		%

Net income attributable to noncontrolling interests	(26)			3		(29)
Net Income Attributable to Kimberly-Clark Corporation	1,457			(199)		1,656
Diluted Earnings per Share(a)	4.31			(0.59)		4.89


	Nine Months Ended September 30, 2020
	As Reported			2018 Global Restructuring Program		Softex Indonesia Acquisition-Related Costs		As Adjusted Non-GAAP
Cost of products sold	$	9,146		$	237	$	—	$	8,909
Gross Profit	5,158			(237)		—		5,395
Marketing, research and general expenses	2,636			75		9		2,552
Other (income) and expense, net	27			(1)		—		28
Operating Profit	2,495			(311)		(9)		2,815
Nonoperating expense	(57)			(26)		—		(31)
Provision for income taxes	(510)			83		—		(593)
Effective tax rate	22.6		%	—		—		22.8		%
Share of net income of equity companies	104			(1)		—		105
Net income attributable to noncontrolling interests	(37)			2		—		(39)
Net Income Attributable to Kimberly-Clark Corporation	1,813			(253)		(9)		2,075
Diluted Earnings per Share(a)	5.30			(0.74)		(0.03)		6.06

(a) "As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding.

Analysis of Consolidated Results


Net Sales	Percent Change		Adjusted Operating Profit	Percent Change
	Three Months Ended September 30	Nine Months Ended September 30		Three Months Ended September 30	Nine Months Ended September 30
Volume	—	(5)	Volume	(3)	(14)
Net Price	3	2	Net Price	20	9
Mix/Other	1	1	Input Costs	(59)	(34)
Acquisition/Exited Businesses(e)	2	2	Cost Savings(c)	18	14
Currency	1	2	Currency Translation	1	2
Total(a)	7	1	Other(d)	15	2
Organic(b)	4	(2)	Total	(8)	(21)

(a) Total may not equal the sum of volume, net price, mix/other, acquisition/exited businesses and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

(e) Combined impact of the acquisition of Softex Indonesia and exited businesses in conjunction with the 2018 Global Restructuring Program.

Net sales in the third quarter of $5.0 billion increased 7 percent versus the prior year. Changes in foreign currency exchange rates increased sales by 1 percent, and the net impact of the Softex Indonesia acquisition and exited businesses in conjunction with the 2018 Global Restructuring Program increased sales by 2 percent. Organic sales increased 4 percent as changes in net selling prices and product mix increased sales by 3 percent and 1 percent, respectively.

In North America, organic sales increased 3 percent in consumer products and 16 percent in K-C Professional. Outside North America, organic sales increased 6 percent in D&E markets and were even with the prior year in developed markets.

Operating profit in the third quarter was $657 in 2021 and $666 in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia. Third quarter adjusted operating profit was $745 in 2021 and $806 in 2020. Results were impacted by $480 of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs. Results benefited from organic sales growth, $115 of cost savings from our FORCE program, $35 of cost savings from the 2018 Global Restructuring Program and lower marketing, research and general expense.

The third quarter effective tax rate was 21.6 percent in 2021 and 20.1 percent in 2020. The third quarter adjusted effective tax rate was 20.9 percent in 2021 and 22.4 percent in 2020.

Kimberly-Clark’s share of net income of equity companies in the third quarter was $21 in 2021 and $31 in 2020. Kimberly-Clark de Mexico, S.A.B. de C.V. results in 2021 were negatively impacted by higher input costs but benefited from organic sales growth, favorable currency effects and cost savings.

Diluted net income per share for the third quarter was $1.39 in 2021 and $1.38 in 2020. Third quarter adjusted earnings per share were $1.62 in 2021, a decrease of 6 percent compared to $1.72 in 2020.

Year-to-date net sales of $14.5 billion increased 1 percent compared to the year ago period. Organic sales decreased 2 percent as volumes declined 5 percent while changes in net selling prices and product mix increased sales by 2 percent and 1 percent, respectively. Changes in foreign currency exchange rates increased sales by approximately 2 percent and the net impact of the Softex Indonesia acquisition and business exits in conjunction with the 2018 Global Restructuring Program increased sales by 2 percent. Year-to-date operating profit was $2,040 in 2021 and $2,495 in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program and in 2020 include acquisition-related costs associated with the acquisition of Softex Indonesia. Year-to-date adjusted operating profit was $2,225 in 2021 and $2,815 in 2020. Results were impacted by lower sales volumes, $960 of higher input costs and elevated other manufacturing costs. Results benefited from higher net selling prices, $295 of FORCE savings, $105 of cost savings from the 2018 Global Restructuring Program and reduced marketing, research and general expense. Through nine months, diluted net income per share was $4.31 in 2021 and $5.30 in 2020. Year-to-date adjusted earnings per share were $4.89 in 2021 and $6.06 in 2020.

Results by Business Segments

Personal Care


	Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020			2021		2020		2021		2020
Net Sales	$	2,656	$	2,339	$	7,635	$	6,990	Operating Profit	$	496	$	486	$	1,431	$	1,532

Net Sales	Percent Change				Percent Change				Operating Profit	Percent Change				Percent Change
Volume			3				1		Volume			4				(1)
Net Price			4				1		Net Price			21				6
Mix/Other			2				2		Input Costs			(46)				(27)
Acquisition/Exited Businesses(e)			3				4		Cost Savings(c)			9				10
Currency			1				1		Currency Translation			1				1
Total(a)			14				9		Other(d)			13				4
Organic(b)			9				4		Total			2				(7)

(a) Total may not equal the sum of volume, net price, mix/other, acquisition/exited businesses and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

(e) Combined impact of the acquisition of Softex Indonesia and exited businesses in conjunction with the 2018 Global Restructuring Program.

Third quarter net sales in North America increased 11 percent. Changes in net selling prices increased sales by 5 percent, volumes rose 4 percent and changes in product mix increased sales by 2 percent. Changes in foreign currency exchange rates increased sales by 1 percent, while exited business related to the 2018 Global Restructuring program reduced sales by 1 percent.

Net sales in D&E markets increased 18 percent. The Softex Indonesia acquisition increased sales by approximately 11 percent while changes in foreign currency exchange rates increased sales by 1 percent. Changes in net selling prices and product mix increased sales by 4 percent and 3 percent, respectively. Organic sales increased in Argentina, Brazil, China, Eastern Europe, India and South Africa but declined in ASEAN and most of the rest of Latin America.

Net sales in developed markets outside North America increased 11 percent including a 4 percent favorable impact from changes in foreign currency exchange rates. Volumes increased 5 percent, and changes in net selling prices increased sales by 2 percent.

Operating profit of $496 increased 2 percent. Results benefited from organic sales growth, cost savings and reduced marketing, research and general expense. The comparison was impacted by input cost inflation.

Consumer Tissue


	Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020			2021		2020		2021		2020
Net Sales	$	1,541	$	1,623	$	4,475	$	4,991	Operating Profit	$	222	$	318	$	687	$	1,111

Net Sales	Percent Change				Percent Change				Operating Profit	Percent Change				Percent Change
Volume			(7)				(12)		Volume			(15)				(24)
Net Price			1				—		Net Price			6				2
Mix/Other			—				(1)		Input Costs			(53)				(31)
Currency			1				2		Cost Savings(c)			29				18
Total(a)			(5)				(10)		Currency Translation			1				2
Organic(b)			(6)				(12)		Other(d)			2				(5)
									Total			(30)				(38)

(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(d) Includes impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Third quarter net sales in North America decreased 8 percent. Volumes fell 8 percent and changes in product mix decreased sales by 1 percent, while changes in net selling prices increased sales by 1 percent.

Net sales in D&E markets increased 5 percent including a 1 percent favorable impact from changes in foreign currency exchange rates. Changes in net selling prices and product mix increased sales by 3 percent and approximately 1 percent, respectively, while volumes were down 3 percent. The Softex Indonesia acquisition increased sales by 4 percent.

Net sales in developed markets outside North America decreased 6 percent. Volumes were down 6 percent, while changes in net selling prices increased sales by 1 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales by 4 percent, while changes in foreign currency exchange rates increased sales by 3 percent.

Operating profit of $222 decreased 30 percent. The comparison was impacted by lower organic sales, higher input costs and other manufacturing cost increases, including inefficiencies from lower production volumes. Results benefited from cost savings and reduced marketing, research and general expense.

K-C Professional


	Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020			2021		2020		2021		2020
Net Sales	$	797	$	705	$	2,314	$	2,277	Operating Profit	$	96	$	87	$	332	$	423

Net Sales	Percent Change				Percent Change				Operating Profit	Percent Change				Percent Change
Volume			6				(7)		Volume			3				(24)
Net Price			5				6		Net Price			41				31
Mix/Other			—				1		Input Costs			(98)				(47)
Currency			1				2		Cost Savings(c)			12				11
Total(a)			13				2		Currency Translation			2				2
Organic(b)			12				—		Other(d)			50				5
									Total			10				(22)

(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Third quarter net sales in North America increased 16 percent. Volumes increased approximately 10 percent and changes in net selling prices increased sales by 6 percent. Changes in product mix and foreign currency exchange rates each increased sales slightly. Sales were up significantly in washroom products reflecting comparison to a weak year-ago period.

Net sales in D&E markets increased 14 percent including a 1 percent benefit from changes in foreign currency exchange rates. Volumes rose approximately 10 percent, compared to a soft year-ago period, and changes in net selling prices and product mix increased sales by 3 percent and 1 percent, respectively.

Net sales in developed markets outside North America increased 3 percent including a 3 percent benefit from changes in foreign currency exchange rates. Changes in net selling prices increased sales by 5 percent while volumes decreased 5 percent.

Operating profit of $96 increased 10 percent. Results benefited from organic sales growth, cost savings, lower other manufacturing costs, and reduced marketing, research and general expense. The comparison was impacted by higher input costs.

2018 Global Restructuring Program

Third quarter 2021 pre-tax savings from the 2018 Global Restructuring Program were $35, bringing cumulative savings to $525. See Item 1, Note 2 to the unaudited interim consolidated financial statements for additional information.

To implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2021.

Liquidity and Capital Resources

Cash Provided by Operations

Cash provided by operations was $1.7 billion for the first nine months of 2021 compared to $2.8 billion in the prior year. The decrease was driven by lower earnings, working capital increase in accounts receivable and inventory, payments for accrued expenses and timing of tax payments.

Investing

During the nine months ended September 30, 2021, our capital spending was $734 compared to $894 in the prior year. We anticipate that full year capital spending will be $1.0 billion to $1.1 billion, down from our prior estimate of $1.1 to $1.2 billion.

Financing

Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other similar short-term debt issued by non-U.S. subsidiaries, was $1.1 billion as of September 30, 2021 (included in Debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the third quarter of 2021 was $1.3 billion. These short-term borrowings provide supplemental funding for supporting our operations. The level of short-term debt

generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as dividends and income taxes.

At September 30, 2021 and December 31, 2020, total debt was $8.9 billion and $8.4 billion, respectively.

We maintain a $2.0 billion revolving credit facility which expires in June 2026 and a $750 revolving credit facility which expires in June 2022. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.

The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), is in the process of phasing out LIBOR with completion of the phase out expected by June 30, 2023. We have evaluated the potential effect of the elimination of LIBOR and do not expect the effect to be material. Accounting guidance has been issued to ease the transition to alternative reference rates from a financial reporting perspective.

We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During the first nine months of 2021, we repurchased 3.0 million shares of our common stock at a cost of $393 through a broker in the open market. We expect our full-year repurchases will be approximately $400, at the low end of the previously estimated range of $400 to $450.

K-C Argentina began accounting for their operations as highly inflationary effective July 1, 2018, as required by GAAP. 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, 2021, 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 three and nine months ended September 30, 2021.

We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, payments for our 2018 Global Restructuring Program, capital spending, pension contributions, dividends and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.

Information Concerning Forward-Looking Statements

Certain matters contained in this report concerning the business outlook, including raw material, energy and other input costs, the anticipated cost savings from our FORCE program, costs and savings from the 2018 Global Restructuring Program, cash flow and uses of cash, growth initiatives, innovations, marketing and other spending, net sales, anticipated currency rates and exchange risks, including the impact in Argentina, effective tax rate, contingencies and anticipated transactions of Kimberly-Clark, including dividends, share repurchases and pension contributions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are based upon management's expectations and beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.

The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control, including pandemics (including the ongoing COVID-19 outbreak and the related responses of governments, consumers, customers, suppliers and employees), epidemics, fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, supply chain disruptions due to COVID-19, changes in customer preferences (including consumer tissue destocking following a COVID-19 related stock up in 2020), severe weather conditions or government trade or similar regulatory actions, potential competitive pressures on selling prices for our products, energy costs, general economic and political conditions globally and in the markets in which we do business, as well as our ability to maintain key customer relationships and to realize the expected benefits and synergies of the Softex Indonesia acquisition, could affect the realization of these estimates.

For a description of certain factors that could cause our future results to differ from those expressed in these forward-looking statements, see Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 entitled "Risk Factors." Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.

Item 4. Controls and Procedures

As of September 30, 2021, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2021. There were no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. All our share repurchases during the third quarter of 2021 were made through a broker in the open market.

The following table contains information for shares repurchased during the third quarter of 2021. None of the shares in this table were repurchased directly from any of our officers or directors.


Period (2021)	Total Number of Shares Purchased(a)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(b)
July 1 to July 31	310,500	$	135.07	38,142,476	41,857,524
August 1 to August 31	58,807	135.91		38,201,283	41,798,717
September 1 to September 30	55,500	136.60		38,256,783	41,743,217
Total	424,807

(a)Share repurchases were made pursuant to a share repurchase program authorized by our Board of Directors on November 13, 2014. This program allows for the repurchase of 40 million shares in an amount not to exceed $5 billion (the "2014 Program").

(b)Includes shares under the 2014 Program, as well as available shares under a share repurchase program authorized by our Board of Directors on January 22, 2021 that allows for the repurchase of 40 million shares in an amount not to exceed $5 billion.

Item 6. Exhibits

(a)Exhibits

Exhibit No. (3)a. Restated Certificate of Incorporation, as amended April 29, 2021, incorporated by reference to Exhibit No. (3)a of the Corporation's Current Report on Form 8-K filed on April 29, 2021.

Exhibit No. (3)b. By-Laws, as amended April 29, 2021, incorporated by reference to Exhibit No. (3)b of the Corporation's Current Report on Form 8-K filed on April 29, 2021.

Exhibit No. (4). Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.

Exhibit No. (31)a. Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), filed herewith.

Exhibit No. (31)b. Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), filed herewith.

Exhibit No. (32)a. Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.

Exhibit No. (32)b. Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.

Exhibit No. (101).INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Exhibit No. (101).SCH XBRL Taxonomy Extension Schema Document

Exhibit No. (101).CAL XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit No. (101).DEF XBRL Taxonomy Extension Definition Linkbase Document

Exhibit No. (101).LAB XBRL Taxonomy Extension Label Linkbase Document

Exhibit No. (101).PRE XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit No. 104 The cover page from this Current Report on Form 10-Q formated as Inline XBRL

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.