KIMBERLY CLARK CORP

Previous wording

The 2024 Transformation Initiative is intended to improve our focus on growth and reduce our structural cost base by reorganizing into three new business segments, making the corporate and regional overhead cost structures more efficient and optimizing our global supply chain. The transformation is expected to impact our organization in all major geographies, and workforce reductions are expected to be in the range of 4 percent to 5 percent. Certain actions under the transformation initiative are being finalized for implementation, and accounting for such actions will commence when the actions are authorized for execution. We expect to complete the transition to the new organizational structure by the end of 2024, and the transformation initiative is expected to be completed by the end of 2026. Total pre-tax savings are expected to be $3 billion in gross productivity; inclusive of input cost and manufacturing cost savings, and $200 in selling, general and administrative expenses. Total costs are anticipated to be approximately $1.5 billion pre-tax. Cash costs are expected to be approximately half of that amount, primarily related to workforce reductions. Non-cash charges are primarily related to incremental depreciation and asset write-offs. First quarter total transformation initiative charges were $45 pre-tax ($34 after tax).

Current wording

The 2024 Transformation Initiative is intended to improve our focus on growth and reduce our structural cost base by reorganizing into three new business segments, making the corporate and regional overhead cost structures more efficient and optimizing our global supply chain. The transformation is expected to impact our organization in all major geographies, and workforce reductions are expected to be in the range of 4 percent to 5 percent. Certain actions under the transformation initiative are being finalized for implementation, and accounting for such actions will commence when the actions are authorized for execution. We expect to complete the transition to the new organizational structure by the end of 2024, and the transformation initiative is expected to be completed by the end of 2026. Total pre-tax savings are expected to be $3.0 billion in gross productivity; inclusive of input cost and manufacturing cost savings, and $200 in selling, general and administrative expenses. Total costs are anticipated to be approximately $1.5 billion pre-tax. Cash costs are expected to be approximately half of that amount, primarily related to workforce reductions. Expected non-cash charges are primarily related to incremental depreciation and asset write-offs, including losses associated with the expected exit of certain markets. Second quarter total transformation initiative charges were $190 pre-tax ($117 after tax). For the six months ended June 30, 2024, total transformation initiative charges were $235 pre-tax ($151 after tax).

Previous wording

On April 7, 2024, we entered into an agreement to sell the personal protective equipment business included in our K-C Professional business segment for $640, subject to a customary purchase price adjustment. The transaction includes Kimtech branded products, such as gloves, apparel and masks, and KleenGuard branded products, such as gloves, apparel, respirators and eyewear, which serve a variety of scientific and industrial industries globally. The transaction is pending customary conditions and regulatory approval and is expected to close in the third quarter of 2024.

Current wording

On July 1, 2024, we completed the pending sale transaction that was announced on April 7, 2024, of the personal protective equipment business included in our K-C Professional business segment for $640, subject to certain post-closing adjustments. The transaction includes Kimtech branded products, such as gloves, apparel and masks, and KleenGuard branded products, such as gloves, apparel, respirators and eyewear, which serve a variety of scientific and industrial industries globally. The assets included in the sale agreement have been reclassified to Other current assets as of June 30, 2024, and we will recognize a gain in Other (income) and expense, net in the third quarter of 2024.

Previous wording

Beginning in March 2022, we have implemented significant adjustments to our business in Russia. We have substantially curtailed media, advertising and promotional activity and suspended capital investments in our sole manufacturing facility in Russia. Consistent with the humanitarian nature of our products, we manufacture and sell only essential items in Russia, such as baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies. Our Russia business has represented approximately 1 to 2 percent of our net global sales, operating profit and total assets. Our ability to continue our operations in Russia may change as the situation evolves. Our business in Russia is experiencing increased input costs, supply chain complexities, reduced consumer demand, restricted access to raw materials and production assets, and restricted access to financial institutions, as well as increased supply chain, professional services, monetary, currency, trade and payment/investment sanctions and related controls. We are actively monitoring the situation, and as the business, geopolitical and regulatory environment concerning Russia evolves, we may not be able to sustain the limited manufacture and sale of our products, and our assets may be partially or fully impaired. We are also monitoring the increased risk of cyber-based attacks as a result of the war in Ukraine and have implemented additional cybersecurity measures designed to address the evolving threat landscape.

Current wording

Consistent with the humanitarian nature of our products, we manufacture and sell only essential items in Russia, such as baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies. Beginning in March 2022, we significantly adjusted our business in Russia, substantially curtailing media, advertising and promotional activity and suspending capital investments, other than certain maintenance investments, in our sole manufacturing facility in Russia. Our Russia business has represented approximately 1 to 2 percent of our net global sales, operating profit and total assets. Our ability to continue our operations in Russia may change as the situation evolves. We have experienced high input costs, supply chain complexities, reduced consumer demand, restricted access to raw materials and production assets, and restricted access to financial institutions, as well as supply chain, professional services, monetary, currency, trade and payment/investment sanctions and related controls. As the business, geopolitical and regulatory environment concerning Russia evolves, we may not be able to sustain the limited manufacture and sale of our products, and our assets may be partially or fully impaired.

Previous wording

This section presents a discussion and analysis of our first quarter 2024 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, product mix and net selling prices on net sales. Changes in foreign currency exchange rates and divestitures and business exits also impact the year-over-year change in net sales. Revenue growth management is used to describe our capability that helps optimize our consumer value proposition and thereby maximize our brands' revenue potential with consumer-centric insights. It focuses on strategic pricing decisions, price pack architecture, managing our product mix, trade promotion activity and trading terms. Our analysis compares thethree months ended March 31, 2024 results to the same period in 2023.

Current wording

This section presents a discussion and analysis of our second quarter 2024 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, product mix and net selling prices excluding prior year's impact of divestitures on business exits on net sales. Changes in foreign currency exchange rates and divestitures and business exits also impact the year-over-year change in net sales. Revenue growth management is used to describe our capability that helps optimize our consumer value proposition and thereby maximize our brands' revenue potential with consumer-centric insights. It focuses on strategic pricing decisions, price pack architecture, managing our product mix, trade promotion activity and trading terms. Our analysis compares thethree and six months ended June 30, 2024 results to the same periods in 2023.

Previous wording

The non-GAAP financial measures exclude the following item for the relevant time period as indicated in the reconciliation included later in this MD&A:

Current wording

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:

Previous wording

•2024 Transformation Initiative - In 2024, we initiated this transformation initiative to improve our focus on growth and reduce our structural cost base by reorganizing into three new business segments, making the corporate and regional overhead cost structures more efficient and optimizing our global supply chain. Results in the first quarter of 2024 include charges related to this program. See Item 1, Note 2 to the unaudited interim consolidated financial statements for details.

Current wording

•2024 Transformation Initiative - In 2024, we initiated this transformation initiative to improve our focus on growth and reduce our structural cost base by reorganizing into three new business segments, making the corporate and regional overhead cost structures more efficient and optimizing our global supply chain. Results in 2024 include charges related to this program. See Item 1, Note 2 to the unaudited interim consolidated financial statements for details.

Previous wording

•Net sales of $5.1 billion decreased 1 percent compared to the year-ago period, while organic sales grew 6 percent.

Current wording

•Net sales of $5.0 billion decreased 2 percent compared to the year-ago period, while organic sales grew 4 percent.

Previous wording

•Operating profit was $853 in 2024 and $787 in 2023. Net Income Attributable to Kimberly-Clark Corporation was $647 in 2024 compared to $566 in 2023, and diluted earnings per share were $1.91 in 2024 compared to $1.67 in 2023. Results in 2024 included pre-tax $45 (after tax $34) charges related to the 2024 Transformation Initiative.

Current wording

•Operating profit was $655 in 2024 and $113 in 2023. Net Income Attributable to Kimberly-Clark Corporation was $544 in 2024 compared to $102 in 2023, and diluted earnings per share were $1.61 in 2024 compared to $0.30 in 2023. Results in 2024 include charges related to the 2024 Transformation Initiative, compared to 2023 results which include the net benefit related to the sale of the Brazil tissue and K-C Professional business, charges related to the impairment of intangible assets and pension settlement charges.

Previous wording

This section presents a discussion and analysis of our first quarter 2024 net sales, operating profit and other information relevant to an understanding of the results of operations.

Current wording

This section presents a discussion and analysis of our second quarter 2024 net sales, operating profit and other information relevant to an understanding of the results of operations.

Previous wording

(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.

Current wording

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

Previous wording

Net sales in the first quarter of $5.1 billion decreased 1 percent. Organic sales increased 6 percent as changes in net selling prices and product mix increased sales by 4 percent and 1 percent, respectively, with the increase in prices driven by hyperinflationary economies, mainly Argentina. Volume increased approximately 1 percent. Changes in foreign currency exchange rates decreased sales by 5 percent, while the divestiture of our Brazil tissue and K-C Professional business decreased sales by 1 percent.

Current wording

Consolidated net sales for the three months ended June 30, 2024 of $5.0 billion decreased 2 percent compared to the year-ago period. Organic sales increased 4 percent as changes in net selling prices and volume increased sales by 2 percent and 1 percent, respectively, with the increase in net selling prices driven by hyperinflationary economies, mainly Argentina. Changes in foreign currency exchange rates decreased sales by 5 percent, while the divestiture of our Brazil tissue and K-C Professional business decreased sales by 1 percent.

Previous wording

In North America, net sales increased 3 percent, including increases of 2 percent in Personal Care and 6 percent in Consumer Tissue, partially offset by a decrease of 1 percent in K-C Professional. Outside North America, net sales decreased 7 percent in D&E markets and 2 percent in Developed Markets. Organic sales increased 15 percent in D&E markets and decreased 2 percent in Developed Markets.

Current wording

In North America, net sales increased 1 percent primarily from a 5 percent increase in Personal Care, partially offset by a decline of 4 percent and 2 percent in K-C Professional and Consumer Tissue, respectively. Outside North America, net sales decreased 7 percent in D&E markets and 4 percent in Developed Markets, primarily due to divestitures and business exits and unfavorable currency impacts. Organic sales increased 12 percent in D&E markets reflecting both pricing and volume gains, while Developed Markets decreased 3 percent due to temporary energy surcharge-related price increases in the prior period, partially offset by volume gains.

Previous wording

Our share of net income of equity companies in the first quarter was $61 in 2024 and $43 in 2023. The increase was driven by Kimberly-Clark de Mexico, S.A.B. de C.V. results which benefited from favorable foreign currency effects, higher net selling prices and productivity savings, partially offset by higher general and administrative expenses.

Current wording

Our share of net income of equity companies for the three and six months ended June 30, 2024 was $63 and $124, respectively, compared to $50 and $93 for the same year-ago periods. The increases were driven by Kimberly-Clark de Mexico, S.A.B. de C.V. results which benefited from favorable foreign currency effects, volume and mix growth, and productivity savings, partially offset by higher general and administrative expenses.

Previous wording

Net sales in the first quarter of $2.7 billion were consistent with the prior year, while organic sales increased 10 percent, driven by changes in net selling prices and product mix of 7 percent and 1 percent, respectively, with the increase in prices driven by hyperinflationary economies, mainly Argentina. Volume increased approximately 2 percent. Innovation, solid commercial execution and supply improvements contributed to volume growth, led by a 4 percent increase in volume in D&E markets and a 1 percent increase in North America, partially offset by a 2 percent decrease in Developed Markets. Changes in foreign currency exchange rates decreased sales by 9 percent.

Current wording

Net sales for the three months ended June 30, 2024 of $2.7 billion were consistent with the prior year as organic growth of 8 percent was offset by foreign currency translation. The increase in organic sales was driven by changes in net selling prices, volume, and product mix of 4 percent, 3 percent and 1 percent, respectively. The increase in net selling prices was driven by hyperinflationary economies, mainly Argentina, while innovation, commercial execution and supply improvements contributed to volume growth, led by a 4 percent and 2 percent increase in our North America and D&E markets, respectively. Net sales for the six months ended June 30, 2024 were flat to the prior year, consistent with the impacts of organic growth and foreign currency translation discussed above.

Previous wording

First quarter operating profit of $545 increased 12 percent. Results benefited primarily from higher net revenue realization and productivity savings, partially offset by unfavorable currency effects and higher marketing, research and general expenses.

Current wording

Operating profit for the three and six months ended June 30, 2024 of $540 and $1.1 billion increased 14 percent and 13 percent, respectively, compared to the same year-ago periods. Results benefited primarily from favorable volume and mix, pricing net of inflation and gross supply chain productivity savings, partially offset by unfavorable currency effects and higher marketing, research and general expenses.

Previous wording

First quarter operating profit of $188 increased 18 percent. Results benefited from productivity savings and higher net selling prices, partially offset by lower volumes.

Current wording

Operating profit for the three months ended June 30, 2024 of $186 decreased 1 percent compared to the prior year as productivity gains were offset by manufacturing cost headwinds, higher marketing, research and general expenses, and unfavorable pricing net of cost inflation. Operating profit for the six months ended June 30, 2024 of $374 increased 8 percent compared to the same year-ago period. Results primarily benefited from productivity savings and higher net selling prices, partially offset by lower volumes.

Previous wording

Cash provided by operations was $438 for the first three months of 2024 compared to $613 in the prior year. The decrease was driven by unfavorable changes in operating working capital partially offset by the increase in operating profit.

Current wording

Cash provided by operations was $1.5 billion during the six months ended June 30, 2024 compared to $1.4 billion in the prior year. The increase was driven by the increase in operating profit, excluding the effect of non-cash charges, partially offset by unfavorable changes in operating working capital.

Previous wording

During the three months ended March 31, 2024, our capital spending was $194 compared to $201 in the prior year. We anticipate that full year capital spending will be approximately $900, including incremental spending from the 2024 Transformation Initiative.

Current wording

During the six months ended June 30, 2024, our capital spending was $352 compared to $389 in the prior year. We anticipate that full year capital spending will be approximately $800, including incremental spending from the 2024 Transformation Initiative. Proceeds from asset and business dispositions of $218 in the first six months of 2023 primarily reflected the sale of our Brazil tissue and K-C Professional business.

Previous wording

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 $7 as of March 31, 2024 (included in Debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the first quarter of 2024 was $4. These short-term borrowings provide supplemental funding to support 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.

Current wording

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 $9 as of June 30, 2024 (included in Debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the second quarter of 2024 was $6. These short-term borrowings provide supplemental funding to support 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.

Previous wording

We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During the first three months of 2024, we repurchased 459 thousand shares of our common stock at a total cost of $56 through a broker in the open market.

Current wording

We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During the six months ended June 30, 2024, we repurchased 1.2 million shares of our common stock at a total cost of $159 through a broker in the open market.

Previous wording

Transformation Initiative (including risks related to disruptions to our business or operations or related to any delays in implementation), war in Ukraine (including the related responses of consumers, customers, and suppliers and sanctions issued by the U.S., the European Union, Russia or other countries), pandemics, epidemics, fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, supply chain disruptions, disruptions in the capital and credit markets, counterparty defaults (including customers, suppliers and financial institutions with which we do business), failure to realize the expected benefits or synergies from our acquisition and disposition activity, impairment of goodwill and intangible assets and our projections of operating results and other factors that may affect our impairment testing, changes in customer preferences, severe weather conditions, regional instabilities and hostilities (including the war in Israel), 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, could affect the realization of these estimates.

Current wording

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 the risk that we are not able to realize the anticipated benefits of the 2024 Transformation Initiative (including risks related to disruptions to our business or operations or related to any delays in implementation), war in Ukraine (including the related responses of consumers, customers, and suppliers and sanctions issued by the U.S., the European Union, Russia or other countries), pandemics, epidemics, fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, supply chain disruptions, disruptions in the capital and credit markets, counterparty defaults (including customers, suppliers and financial institutions with which we do business), failure to realize the expected benefits or synergies from our acquisition and disposition activity, impairment of goodwill and intangible assets and our projections of operating results and other factors that may affect our impairment testing, changes in customer preferences, severe weather conditions, regional instabilities and hostilities (including the war in Israel), 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, could affect the realization of these estimates.

Previous wording

The factors described under Item 1A, "Risk Factors" in our Form 10-K, or in our other SEC filings, among others, could cause our future results to differ from those expressed in any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.

Current wording

The factors described under Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, or in our other SEC filings, among others, could cause our future results to differ from those expressed in any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.