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 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:

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 nine months ended September 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

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.

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 $100 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

As a result of the IFP Transaction discussed above and the changes to our reportable segments effective in the fourth quarter of 2024 (refer to our Annual Report on Form 10-K for further details), the Company's continuing operations are now organized into two reportable segments defined by geographic region: North America ("NA") and International Personal Care ("IPC"). The results of the IFP Business, including certain costs that were previously allocated to the IPC segment that relate to assets or activities that are part of the IFP Transaction, are reported as discontinued operations and excluded from segment results for all periods presented. Additionally, certain operations and commercial activities of the former IFP segment retained by the Company are now reported in the NA and IPC segments. Further, Corporate and Other was updated for all periods presented to include the following:

Current wording

and International Personal Care ("IPC"). The results of the IFP Business, including certain costs that were previously allocated to the IPC segment that relate to assets or activities that are part of the IFP Transaction, are reported as discontinued operations and excluded from segment results for all periods presented. Additionally, certain operations and commercial activities of the former IFP segment retained by the Company are now reported in the NA and IPC segments. Further, Corporate and Other was updated for all periods presented to include the following:

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 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).

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 September 30, 2025 and 2024, total 2024 Transformation Initiative charges were $62 pre-tax ($50 after-tax) and $124 pre-tax ($106 after-tax), respectively. For the nine months ended September 30, 2025 and 2024, total 2024 Transformation Initiative charges were $261 pre-tax ($222 after-tax), and $359 pre-tax ($257 after-tax), respectively. Through September 30, 2025, cumulative pre-tax charges for the 2024 Transformation Initiative were $718 ($561 after-tax).

Previous 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% 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.

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% of our global net 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

Net sales of $4.2 billion for the three months ended June 30, 2025 declined 1.6% primarily due to divestitures and business exits and unfavorable currency impacts, partially offset by organic sales. Organic sales increased 3.9% driven by volume gains, partially offset by lower pricing, while mix was flat compared to the prior year.

Current wording

Net sales of $12.4 billion for the nine months ended September 30, 2025 declined 2.6%, primarily driven by divestitures and business exits and unfavorable currency impacts, partially offset by organic sales growth. Organic sales increased 1.6% driven by volume gains of 2.4%, partially offset by lower pricing.

Previous wording

Gross profit of $3.0 billion for the six months ended June 30, 2025 decreased 9.6%, while gross margin of 36.1% decreased 220 basis points. Gross margin in the current and prior year included approximately 160 basis points and 60 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 120 basis points to 37.7% primarily due to unfavorable pricing net of cost inflation, partially offset by gross productivity savings from integrated margin management of approximately $200.

Current wording

Gross profit of $1.5 billion for the three months ended September 30, 2025 decreased 4.5%, while gross margin of 36.0% decreased 170 basis points. Gross margin in the current and prior year included approximately 80 basis points for charges related to the 2024 Transformation Initiative, primarily for incremental depreciation expense, workforce reductions and asset write-offs. The decline in gross profit was primarily due to unfavorable pricing net of cost inflation, including tariff impacts, and supply chain related investments, partially offset by gross productivity savings from integrated margin management of approximately $125.

Previous 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.

Current wording

Gross profit of $4.5 billion for the nine months ended September 30, 2025 decreased 8.0%, while gross margin of 36.0% decreased 210 basis points. Gross margin in the current and prior year included approximately 140 basis points and 60 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 130 basis points to 37.4% primarily due to unfavorable pricing net of cost inflation, including tariff impacts, and supply chain related investments, partially offset by gross productivity savings from integrated margin management of approximately $325.

Previous wording

Operating profit for the three and six months ended June 30, 2025 was $592 and $1.2 billion, respectively, compared to $539 and $1.3 billion in the prior year. Results included charges related to the 2024 Transformation Initiative of $121 and $196 for the three and six months ended June 30, 2025, respectively, and $190 and $235 for the three and six months ended June 30, 2024. Excluding these items, adjusted operating profit for the three and six months ended June 30, 2025 was $713 and $1.4 billion, respectively, representing a 2.2% and 4.7% decrease compared to the prior year.

Current wording

Operating profit for the three and nine months ended September 30, 2025 was $621 and $1.8 billion, respectively, compared to $1.0 billion and $2.3 billion in the prior year. Results included charges related to the 2024 Transformation Initiative of $62 and $258 for the three and nine months ended September 30, 2025, respectively, and $124 and $359 for the three and nine months ended September 30, 2024. Results in 2024 also included a $565 gain from the sale of our PPE business and charges of $97 for the impairment of intangible assets. Excluding these items, adjusted operating profit for the three and nine months ended September 30, 2025 was $683 and $2.1 billion, respectively, compared to $682 and $2.2 billion in the prior year.

Previous 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.

Current wording

The decrease in adjusted operating profit for the nine months ended September 30, 2025 resulted from lower net sales and adjusted gross profit discussed above, coupled with a 400 basis point impact from divestitures and business exits and unfavorable currency impacts, partially offset by lower marketing, research and general expenses.

Previous wording

Income from Continuing Operations for the three and six months ended June 30, 2025 was $444 and $914, respectively, compared to $464 and $1.0 billion in the prior year. Apart from the operating profit drivers discussed above, the decrease was primarily related to a higher effective tax rate and lower income from equity companies.

Current wording

Income from Continuing Operations for the three and nine months ended September 30, 2025 was $344 and $1.3 billion, respectively, compared to $823 and $1.8 billion in the prior year. Apart from the operating profit drivers discussed above, the decrease was primarily related to a higher effective tax rate and lower income from equity companies.

Previous 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.

Current wording

Our share of net income of equity companies for the three and nine months ended September 30, 2025 was $46 and $137, respectively, compared to $48 and $172 for the prior year. The decrease for the nine months ended 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

Diluted earnings per share for the three and six months ended June 30, 2025 were $1.33 and $2.72, respectively, compared to $1.35 and $2.96 for the prior year. Adjusted diluted earnings per share for the three and six months ended June 30, 2025 were $1.63 and $3.25, respectively, representing a 4.1% and 4.7% decrease compared to the prior year. The decrease was primarily driven by lower adjusted operating profit and lower income from equity companies, which more than offset the benefits from lower dilutive shares outstanding.

Current wording

Diluted earnings per share for the three and nine months ended September 30, 2025 were $1.01 and $3.73, respectively, compared to $2.42 and $5.37 for the prior year. Adjusted diluted earnings per share for the three and nine months ended September 30, 2025 were $1.45 and $4.70, respectively, representing a 7.1% and 5.2% decrease compared to the prior year. The decrease was primarily driven by lower adjusted operating profit, higher income tax expense caused by OBBBA, and lower income from equity companies, which more than offset the benefits from lower dilutive shares outstanding.

Previous wording

Income from discontinued operations, net of income taxes for the three and six months ended June 30, 2025 was $68 and $171, respectively, compared to $89 and $191 in the prior year. The decrease was primarily driven by pre-tax separation costs of $33 million.

Current wording

Income from discontinued operations, net of income taxes for the three months ended September 30, 2025 was $110 compared to $92 in the prior year. The increase was driven by a reduction in depreciation and amortization expense of $30, partially offset by pre-tax separation costs of $17.

Previous wording

Net sales of $2.7 billion for the three months ended June 30, 2025 decreased 1.9%, primarily due to the sale of the PPE business and the exit of the private label diaper business in the US. Organic sales increased 4.3% primarily due to volume gains of 5.2%, partially offset by lower pricing and mix. Net sales of $5.4 billion for the six months ended June 30, 2025 decreased 2.9%, while organic sales increased 1.8%. Impacts of divestitures and business exits and the components of organic growth are consistent with the drivers discussed above.

Current wording

Net sales of $2.7 billion for the three months ended September 30, 2025 decreased 0.8% due to the exit of the private label diaper business in the US, partially offset by organic sales growth. Organic sales increased 2.7% primarily from volume gains of 2.6%, driven by Baby & Child Care, Adult & Fem Care and Professional categories. Net sales of $8.1 billion for the nine months ended September 30, 2025 decreased 2.2% from a combination of the sale of the PPE business and the exit of the private label diaper business in the US, partially offset by organic sales growth. Organic sales increased 2.1% driven by volume gains of 2.6%, with all categories growing volume, partially offset by lower pricing and mix.

Previous wording

Net sales of $1.4 billion for the three months ended June 30, 2025 increased 0.4% primarily due to an increase in organic sales of 3.3%, partially offset by unfavorable currency impacts. Organic sales benefited from volume and mix gains of 4.8% and 1.2%, respectively, partially offset by lower pricing. Net sales of $2.8 billion for the six months ended June 30, 2025 decreased 4.5% primarily driven by unfavorable currency impacts, while organic sales were in line with the prior year.

Current wording

Net sales of $1.4 billion for the three months ended September 30, 2025 increased 1.9% primarily due to a 2.1% increase in organic sales. Organic sales benefited from volume and mix gains of 2.0% and 1.6%, respectively, driven by China, South Korea, Australia and Indonesia, partially offset by lower pricing. Net sales of $4.3 billion for the nine months ended September 30, 2025 decreased 2.5% primarily driven by unfavorable currency impacts, partially offset by organic sales growth of 0.8%. The components of organic sales are consistent with the drivers discussed above.

Previous 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.

Current wording

Cash provided by operations was $1.8 billion during the nine months ended September 30, 2025 compared to $2.4 billion in the prior year. The decrease was driven by lower operating profit and timing impacts to working capital, including incremental restructuring and IFP Transaction separation cost payments of approximately $120.

Previous 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.

Current wording

Cash used for investing was $650 during the nine months ended September 30, 2025 compared to cash provided by investing of $94 in the prior year. This change is primarily due to proceeds from asset and business dispositions of $649 in 2024, primarily reflecting the sale of our PPE business. During the nine months ended September 30, 2025, our capital spending was $741 compared to $512 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 $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.

Current wording

Cash used for financing was $1.6 billion during the nine months ended September 30, 2025 compared to $2.5 billion in the prior year. This decrease was primarily due to decreased share repurchases, coupled with an increase in U.S. commercial paper. During the nine months ended September 30, 2025, we repurchased 1.1 million shares of our common stock pursuant to our publicly announced share repurchase programs at a total cost of $140 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 $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.

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 $421 as of September 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 nine months ended September 30, 2025 was $257. 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 June 30, 2025 and December 31, 2024, total debt from continuing operations was $7.2 billion and $7.4 billion, respectively.

Current wording

As of September 30, 2025 and December 31, 2024, total debt from continuing operations was $7.3 billion and $7.4 billion, respectively.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are expecting favorable cash tax impacts in the near and medium term as a result of the OBBBA, however, we are still assessing its impact on our consolidated financial statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are expecting favorable cash tax impacts in the near and medium term as a result of the OBBBA. During the three months ended September 30, 2025, provisions within the OBBBA increased the Noncurrent deferred tax liability by approximately $200 primarily due to the valuation allowance recorded in the quarter and changes providing for the immediate deduction of previously capitalized research and development expenditures.

Previous 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.

Current wording

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

We use these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that we do not believe reflect our underlying and ongoing operations. We believe that presenting these non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliation to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

Current wording

We use these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that we do not believe reflect our underlying and ongoing operations. We believe that presenting these non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S.

Previous wording

•IFP Repatriated Earnings – In connection with the IFP Transaction, we recognized a deferred tax liability for certain permanently reinvested earnings from the IFP Business that are expected to be repatriated prior to the close of the transaction.

Current wording

•IFP Repatriated Earnings – In 2025, in connection with the IFP Transaction, we recognized a deferred tax liability for certain permanently reinvested earnings from the IFP Business that are expected to be repatriated prior to the close of the transaction.