KIMBERLY CLARK CORP

Previous wording

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, cash flows and future prospects. The following MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 and the unaudited interim condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q. Our analysis compares results for thethree months ended March 31, 2025 to the same period in 2024. Amounts are reported in millions of dollars, except per share amounts, unless otherwise noted. The following will be discussed and analyzed:

Current wording

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, cash flows and future prospects. The following MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 and the Unaudited Interim Condensed Consolidated Financial Statements and related notes contained in this Quarterly Report on Form 10-Q. Our analysis compares results for thethree and six months ended June 30, 2025 to the same period in 2024. As discussed in the Notes to the Unaudited Interim Condensed Consolidated Financial Statements, the results and related assets and liabilities of the IFP Business are reported as discontinued operations. As a result, unless specifically stated, all discussions included below reflect continuing operations for all periods presented. Amounts are reported in millions of dollars, except per share amounts, unless otherwise noted. The following will be discussed and analyzed:

Previous wording

The United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. For example, on April 2, 2025, the United States announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. These actions, and retaliatory tariffs imposed by other countries on U.S. exports, have led to significant volatility and uncertainty in global markets. Based on preliminary analysis of the potential effects of the new tariffs that are currently in effect in the U.S. as well as in other markets in which we operate, we estimate incremental costs of approximately $300 in 2025, most of which will be incurred by the North America segment. We are continuing to evaluate these developments and our ability to offset a portion of these costs to mitigate the impact on our business, consolidated results of operations, and financial condition.

Current wording

Changes to U.S. trade policy, including increasing tariffs on imports have led to significant volatility and uncertainty in global markets. We estimate that the incremental costs of the new tariffs that are currently in effect in the U.S., as well as in other markets in which we operate, to be approximately $170 in 2025, most of which will be incurred by the North America segment. We are continuing to evaluate these developments and our ability to offset a portion of these costs to mitigate the impact on our business, consolidated results of operations, and financial condition.

Previous wording

In the fourth quarter of 2024, we realigned our internal operating and management structure as part of the 2024 Transformation Initiative. As result, we manage and report our operations through three reportable segments defined by geographic regions and product groupings: North America ("NA"), International Personal Care ("IPC") and International Family Care and Professional ("IFP"). Further, our measure of segment profitability was changed to include the effects of changes in exchange rates on monetary assets and liabilities for subsidiaries where we have adopted highly inflationary accounting. Segment results for the historical period presented in these condensed consolidated financial statements have been recast to reflect these changes. These segments are described in greater detail in Item 1, Note 7 to the unaudited interim condensed consolidated financial statements.

Current wording

International Family Care and Professional ("IFP") Transaction

Previous wording

The transformation is expected to impact our organization in all major geographies, and workforce reductions are expected to be in the range of 4% to 5%. Certain actions under the 2024 Transformation Initiative are being finalized for implementation, and accounting for such actions will commence when the actions are authorized for execution. The 2024 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. For the three months ended March 31, 2025 and 2024, total 2024 Transformation Initiative charges were $77 pre-tax ($77 after-tax) and $45 pre-tax ($34 after-tax), respectively. Through March 31, 2025, cumulative pre-tax charges for the 2024 Transformation Initiative were $534 ($416 after-tax).

Current wording

The transformation is expected to impact our organization in all major geographies, and workforce reductions are expected to be in the range of 4% to 5%. Certain actions under the 2024 Transformation Initiative are being finalized for implementation, and accounting for such actions will commence when the actions are authorized for execution. The 2024 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 60% of that amount, primarily related to workforce reductions and other program costs. Expected non-cash charges are primarily related to incremental depreciation and asset write-offs, including losses associated with the expected exit of certain markets. For the three months ended June 30, 2025 and 2024, total 2024 Transformation Initiative charges were $122 pre-tax ($95 after-tax) and $190 pre-tax ($117 after-tax), respectively. For the six months ended June 30, 2025 and 2024, total 2024 Transformation Initiative charges were $199 pre-tax ($172 after-tax), and $235 pre-tax ($151 after-tax), respectively. Through June 30, 2025, cumulative pre-tax charges for the 2024 Transformation Initiative were $656 ($511 after-tax).

Previous wording

Gross profit of $1.7 billion for the three months ended March 31, 2025 decreased 9.3%, while gross margin of 35.8% decreased 130 basis points. Gross margin in the current year included approximately 110 basis points for charges related to the 2024 Transformation Initiative, primarily for incremental depreciation expense and workforce reductions. Excluding these charges, adjusted gross margin decreased 20 basis points to 36.9% primarily due to higher manufacturing costs and unfavorable pricing net of cost inflation, partially offset by gross productivity savings from integrated margin management of approximately $110.

Current wording

Gross profit of $1.5 billion for the three months ended June 30, 2025 decreased 8.7%, while gross margin of 35.0% decreased 270 basis points. Gross margin in the current and prior year included approximately 190 basis points and 100 basis points, respectively, for charges related to the 2024 Transformation Initiative, primarily for incremental depreciation expense, workforce reductions and asset write-offs. Excluding these charges, adjusted gross margin decreased 180 basis points to 36.9% primarily due to unfavorable pricing net of cost inflation, including recent tariff impacts, partially offset by gross productivity savings from integrated margin management of approximately $110.

Previous wording

The decrease in adjusted operating profit resulted from lower net sales and adjusted gross profit discussed above partially offset by lower marketing, research and general expenses.

Current wording

The decrease in adjusted operating profit for the three and six months ended June 30, 2025 resulted from lower net sales and adjusted gross profit discussed above partially offset by lower marketing, research and general expenses.

Previous wording

Net income of $567 for the three months ended March 31, 2025 decreased 12.4% primarily due to the decrease in operating profit discussed above. Net interest expense of $57 was in line with the prior year. Our share of net income of equity companies was $44, a decrease of 27.9% primarily driven by Kimberly-Clark de Mexico, S.A.B. de C.V., due to unfavorable foreign currency effects, partially offset by pricing, lower general and administrative expenses and productivity savings. The effective tax rate was 23.8% in 2025 compared to 23.6% in 2024. The adjusted effective tax rate for the three months ended March 31, 2025 was 21.4% compared to 23.6% in 2024. The first quarter of 2025 benefited from the resolution of certain tax matters.

Current wording

Our share of net income of equity companies for the three and six months ended June 30, 2025 was $47 and $91, respectively, compared to $63 and $124 for the prior year. The decrease was primarily driven by Kimberly-Clark de Mexico, S.A.B. de C.V., due to unfavorable foreign currency effects, higher inputs costs and lower volumes, partially offset by pricing, productivity savings and lower general and administrative expenses.

Previous wording

Operating profit of $676 increased 1.3% primarily due to lower marketing, research and general expenses and gross productivity savings, partially offset by the impacts of divestitures and business exits, unfavorable pricing net of cost inflation and lower volumes.

Current wording

Operating profit for the three and six months ended June 30, 2025 of $655 and $1.3 billion decreased 4.0% and 1.3%, respectively, primarily due to impacts of divestitures and business exits, unfavorable pricing net of cost inflation, including recent tariff impacts, partially offset by gross productivity savings and lower marketing, research and general expenses.

Previous wording

Operating profit of $194 decreased 19.8% primarily due to unfavorable pricing net of cost inflation and currency impacts, partially offset by gross productivity savings.

Current wording

Operating profit for the three and six months ended June 30, 2025 of $182 and $383 decreased 12.9% and 16.7%, respectively, primarily due to unfavorable pricing net of cost inflation and currency impacts, partially offset by gross productivity savings and volume gains.

Previous wording

Cash provided by operations was $327 during the three months ended March 31, 2025 compared to $438 in the prior year. The decrease was driven by lower operating profit and unfavorable changes in operating working capital, including higher cash payments related to our 2024 Transformation Initiative.

Current wording

Cash provided by operations was $1.1 billion during the six months ended June 30, 2025 compared to $1.5 billion in the prior year. The decrease was driven by lower operating profit and unfavorable changes in operating working capital, including higher cash payments related to our 2024 Transformation Initiative.

Previous wording

Cash used for investing was $119 during the three months ended March 31, 2025 compared to $181 in the prior year, primarily due to incremental cash flows from maturities of time deposits. During the three months ended March 31, 2025, our capital spending was $204 compared to $194 in the prior year. We anticipate that full year capital spending will be approximately $1.0 to $1.2 billion, including incremental spending from the 2024 Transformation Initiative.

Current wording

Cash used for investing was $312 during the six months ended June 30, 2025 compared to $376 in the prior year, primarily due to incremental cash flows from net maturities of time deposits. During the six months ended June 30, 2025, our capital spending was $401 compared to $352 in the prior year. We anticipate that full year capital spending will be approximately $1.0 to $1.2 billion, including incremental spending from the 2024 Transformation Initiative.

Previous wording

Cash used for financing was $683 during the three months ended March 31, 2025 compared to $485 in the prior year. This increase was primarily due to debt repayments during the current year. During the three months ended March 31, 2025, we repurchased 458 thousand shares of our common stock pursuant to our publicly announced share repurchase programs at a total cost of $61 through a broker in the open market.

Current wording

Cash used for financing was $1.2 billion during the six months ended June 30, 2025 compared to $998 in the prior year. This increase was primarily due to debt repayments during the current year. During the six months ended June 30, 2025, we repurchased 915 thousand shares of our common stock pursuant to our publicly announced share repurchase programs at a total cost of $120 through a broker in the open market.

Previous wording

Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other short-term debt issued by non-U.S. subsidiaries, was $51 as of March 31, 2025 (included in Debt payable within one year on the condensed consolidated balance sheets). The average month-end balance of short-term debt for the three months ended March 31, 2025 was $41. 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 short-term debt issued by non-U.S. subsidiaries, was $59 as of June 30, 2025 (included in Debt payable within one year on the Condensed Consolidated Balance Sheets). The average month-end balance of short-term debt for the six months ended June 30, 2025 was $127. 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

As of March 31, 2025 and December 31, 2024, total debt was $7.2 billion and $7.4 billion, respectively.

Current wording

As of June 30, 2025 and December 31, 2024, total debt from continuing operations was $7.2 billion and $7.4 billion, respectively.

Previous wording

Certain matters contained in this report concerning the business outlook, including raw material, energy and other input costs, the anticipated charges and savings from the 2024 Transformation Initiative, 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 and Türkiye, 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.

Current wording

Certain matters contained in this report concerning the business outlook, including raw material, energy and other input costs, our plans and expectations regarding the pending IFP Transaction, the anticipated charges and savings from the 2024 Transformation Initiative, 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 and Türkiye, 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.

Previous 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), government trade or similar regulatory actions (including current and potential trade and tariff actions affecting the countries where we operate and the resulting negative impacts on our supply chain, commodity costs, and consumer spending), 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), 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 risks and uncertainties around the pending IFP Transaction (including risks related to delays or failure to complete the proposed transaction, the incurrence of significant transaction and separation costs, adverse market reactions, regulatory or legal challenges, and operational disruptions), risks 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), government trade or similar regulatory actions (including current and potential trade and tariff actions affecting the countries where we operate and the resulting negative impacts on our supply chain, commodity costs, and consumer spending), 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), 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 following provides the reconciliation of the non-GAAP financial measures provided in this report to the most closely related GAAP measure. These measures include: Organic Sales Growth, Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Earnings per Share, and Adjusted Effective Tax Rate.

Current wording

The following provides the reconciliation of the non-GAAP financial measures provided in this report to the most closely related GAAP measure. These measures include: Organic Sales Growth, Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Earnings per Share, and Adjusted Effective Tax Rate. All discussions regarding non-GAAP financial measures reflect results from our continuing operations for all periods presented.

Previous wording

•Organic Sales Growth is defined as the change in consolidated Net Sales, as determined in accordance with U.S. GAAP, excluding the impacts of currency translation and divestitures and business exits.

Current wording

•Organic Sales Growth is defined as the change in Net Sales, as determined in accordance with U.S. GAAP, excluding the impacts of currency translation and divestitures and business exits.

Previous wording

•Adjusted Gross and Operating Profit, Adjusted Earnings per Share, and Adjusted Effective Tax Rate are defined as consolidated Gross Profit, Operating Profit, Diluted Earnings per Share, and Effective Tax Rate, respectively, as determined in accordance with U.S. GAAP, excluding the impacts of certain items that management believes do not reflect our underlying operations, and which are discussed in further detail below.

Current wording

•Adjusted Gross and Operating Profit, Adjusted Earnings per Share, and Adjusted Effective Tax Rate are defined as Gross Profit, Operating Profit, Diluted Earnings per Share, and Effective Tax Rate, respectively, as determined in accordance with U.S. GAAP, excluding the impacts of certain items that management believes do not reflect our underlying operations, and which are discussed in further detail below.

Previous wording

The income tax effect of these non-GAAP items on the Company's Adjusted Earnings per Share is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment. The impact of these non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income Before Income Taxes and Equity Interests and Provision for income taxes.

Current wording

The income tax effect of these non-GAAP items on the Company's Adjusted Earnings per Share is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment. The impact of these non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income from Continuing Operations Before Income Taxes and Equity Interests and Provision for income taxes.

Previous wording

The following table provides a reconciliation of Organic Sales Growth:

Current wording

The following tables provide a reconciliation of Organic Sales Growth from continuing operations:

Previous wording

The following table provides a reconciliation of Adjusted Gross Profit:

Current wording

The following table provides a reconciliation of Adjusted Gross Profit from continuing operations:

Previous wording

The following table provides a reconciliation of Adjusted Operating Profit:

Current wording

The following table provides a reconciliation of Adjusted Operating Profit from continuing operations:

Previous wording

The following table provides a reconciliation of Adjusted Earnings per Share:

Current wording

The following table provides a reconciliation of Adjusted Earnings per Share from continuing operations: