NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
. Accounting Policies
Basis of Presentation
The accompanying unaudited 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 with the 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, 2015
. The terms "Corporation," "Kimberly-Clark," "K-C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
Accounting for Venezuelan Operations
Effective December 31, 2015, we deconsolidated the assets and liabilities of our business in Venezuela from our consolidated balance sheet and moved to the cost method of accounting for our operations in that country. As of the first quarter of 2016, we no longer include the results of our Venezuelan business in our consolidated financial statements. The change resulted in the recognition of an after tax charge of
$102
in the fourth quarter of 2015 and, for the three months ended June 30, 2016, other income of
$11
related to an updated assessment. In addition, for the
three
months ended March 31, 2015, we recorded a non-deductible charge of
$45
related to a balance sheet remeasurement. Net sales of K‑C Venezuela were insignificant in 2015.
Balance Sheet Classification of Deferred Taxes
In 2015, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
. Under this ASU, a reporting entity is required to classify all deferred tax assets and liabilities as noncurrent in a classified balance sheet. Current guidance requiring the offsetting of deferred tax assets and liabilities of a tax-paying component of an entity and presentation as a single noncurrent amount is not affected. We early adopted this ASU prospectively as of March 31, 2016 and our consolidated balance sheet reflects the new guidance for classification of deferred taxes. Prior periods were not recasted.
New Accounting Standards
In 2016, the FASB issued ASU No. 2016-09,
Compensation-Stock Compensation (Topic 718)
. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public companies, the amendments in this standard are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The effects of this standard on our financial position, results of operations and cash flows are not expected to be material.
In 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The ASU requires additional disclosures. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The ASU requires adoption based upon a modified retrospective transition approach. Early adoption is permitted. The effects of this standard on our financial position, results of operations and cash flows are not yet known.
In 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. In 2016, the FASB issued four amendments to the ASU. The standard is effective for public companies for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of one year prior to the current effective date. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The effects of this standard on our financial position, results of operations and cash flows are not expected to be material.
Note 2
. 2014 Organization Restructuring
In 2014, we initiated a restructuring plan in order to improve organization efficiency and offset the impact of stranded overhead costs resulting from the spin-off of our health care business. The restructuring is intended to improve our underlying profitability and increase our flexibility to invest in targeted growth initiatives, brand building and other capabilities critical to delivering future growth. The plan is expected to be completed by the end of 2016, with total costs, primarily severance, anticipated to be toward the high end of the range of
$130
to
$160
after tax (
$190
to
$230
pretax). Cash costs are projected to be approximately
80 percent
of the total charges. The restructuring is expected to impact all of our business segments and our organizations in all major geographies.
Total pretax charges were
$1
(
$1
after tax) and
$12
(
$8
after tax) for the
three months ended
June 30, 2016
and
2015
, respectively. Total pretax charges were
$15
(
$11
after tax) and
$25
(
$13
after tax) for the
six months ended
June 30, 2016
and
2015
, respectively. Through
June 30, 2016
, cumulative pretax charges for the restructuring were
$211
(
$148
after tax). Cash payments during the
six months ended
June 30, 2016
and 2015 related to the restructuring were
$40
and
$49
, respectively.
Note 3
. Fair Value Information
The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:
Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. During the
six
months ended
June 30, 2016
and for the full year
2015
, there were
no
significant transfers among level 1, 2, or 3 fair value determinations.
Company-owned life insurance ("COLI") assets and derivative assets and liabilities are measured on a recurring basis at fair value. COLI assets were
$58
and
$57
at
June 30, 2016
and
December 31, 2015
. The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in other assets. The fair value amount of the COLI policies is measured at fair value using the net asset value per share practical expedient, and therefore, is not classified in the fair value hierarchy.
At
June 30, 2016
and
December 31, 2015
, derivative assets were
$51
and
$56
, respectively, and derivative liabilities were
$41
and
$42
, 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 value of hedging instruments used to manage foreign currency risk is 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
$64
at both
June 30, 2016
and
December 31, 2015
. They are not traded in active markets. For certain redeemable securities, fair values were calculated using a floating rate pricing model that compared the stated spread to the fair value spread to determine the price at which each of the financial instruments should trade. The model used the following inputs to calculate fair values: face value, current LIBOR rate, unobservable fair value credit spread, stated spread, maturity date and interest or dividend payment dates. The fair value of the remaining redeemable securities was based on various inputs, including an independent third-party appraisal, adjusted for current market conditions. Measurement of the redeemable preferred securities is considered a level 3 measurement.
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
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
(a)
|
1
|
|
$
|
656
|
|
|
$
|
656
|
|
|
$
|
619
|
|
|
$
|
619
|
|
Time deposits and other
(b)
|
1
|
|
148
|
|
|
148
|
|
|
124
|
|
|
124
|
|
Liabilities and redeemable securities of subsidiaries
|
|
|
|
|
|
|
|
|
|
Short-term debt
(c)
|
2
|
|
758
|
|
|
758
|
|
|
1,071
|
|
|
1,071
|
|
Long-term debt
(d)
|
2
|
|
6,919
|
|
|
7,862
|
|
|
6,704
|
|
|
7,300
|
|
|
|
(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. Other, included in other current assets, is composed of funds held in escrow. Time deposits and other are recorded at cost, which approximates fair value.
|
|
|
(c)
|
Short-term debt is composed of U.S. commercial paper and/or other similar short-term debt issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
|
|
|
(d)
|
Long-term debt includes the current portion of these debt instruments. Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.
|
Note 4
. Employee Postretirement Benefits
The table below presents net periodic benefit cost information for defined benefit plans and other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Three Months Ended June 30
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Service cost
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
3
|
|
|
$
|
2
|
|
Interest cost
|
37
|
|
|
45
|
|
|
9
|
|
|
9
|
|
Expected return on plan assets
|
(40
|
)
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
13
|
|
|
19
|
|
|
(1
|
)
|
|
(1
|
)
|
Settlements
|
—
|
|
|
1,320
|
|
|
—
|
|
|
—
|
|
Other
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
18
|
|
|
$
|
1,336
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Six Months Ended June 30
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Service cost
|
$
|
24
|
|
|
$
|
19
|
|
|
$
|
6
|
|
|
$
|
6
|
|
Interest cost
|
75
|
|
|
109
|
|
|
17
|
|
|
17
|
|
Expected return on plan assets
|
(81
|
)
|
|
(130
|
)
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
26
|
|
|
48
|
|
|
(1
|
)
|
|
(1
|
)
|
Settlements
|
—
|
|
|
1,329
|
|
|
—
|
|
|
—
|
|
Other
|
(5
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
39
|
|
|
$
|
1,368
|
|
|
$
|
22
|
|
|
$
|
22
|
|
Effective January 2015, the U.S. pension plan was amended to include a lump-sum pension benefit payout option for certain plan participants. In addition, in April 2015, the U.S. pension plan completed the purchase of group annuity contracts that transferred to two insurance companies the pension benefit obligations totaling
$2.5
billion for approximately
21,000
Kimberly-Clark retirees in the United States. As a result of these changes, we recognized pension settlement-related charges of
$0.8 billion
after tax (
$1.4 billion
pretax in other (income) and expense, net) during 2015, mostly in the second quarter. In connection with these transactions, during the first quarter of
2015
we made a
$410
contribution to our U.S. pension plan in order to maintain the plan’s funded status.
For the
six months ended
June 30, 2016
and
2015
, we made cash contributions of
$30
and
$435
, respectively, to our pension trusts. We expect to contribute up to
$100
to our defined benefit pension plans for the full year 2016.
Note 5
. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing EPS. A reconciliation of the average number of common shares outstanding used in the basic and diluted EPS computations follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
Six Months Ended
June 30
|
(Millions of shares)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Basic
|
|
360.0
|
|
|
364.3
|
|
|
360.4
|
|
|
364.7
|
|
Dilutive effect of stock options and restricted share unit awards
|
|
2.4
|
|
|
2.4
|
|
|
2.5
|
|
|
2.6
|
|
Diluted
|
|
362.4
|
|
|
366.7
|
|
|
362.9
|
|
|
367.3
|
|
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 were insignificant.
The number of common shares outstanding as of
June 30, 2016
and
2015
was
359.7 million
and
364.3 million
, respectively.
Note 6
. Stockholders' Equity (Deficit)
Set forth below is a reconciliation for the
six
months ended
June 30, 2016
of the carrying amount of total stockholders' equity (deficit) from the beginning of the period to the end of the period.
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit) Attributable to
|
|
|
The Corporation
|
|
Noncontrolling Interests
|
Balance at December 31, 2015
|
|
$
|
(174
|
)
|
|
$
|
214
|
|
Net Income
|
|
1,111
|
|
|
26
|
|
Other comprehensive income, net of tax
|
|
|
|
|
Unrealized translation
|
|
132
|
|
|
4
|
|
Employee postretirement benefits
|
|
7
|
|
|
—
|
|
Other
|
|
(7
|
)
|
|
—
|
|
Stock-based awards exercised or vested
|
|
58
|
|
|
—
|
|
Recognition of stock-based compensation
|
|
45
|
|
|
—
|
|
Income tax benefits on stock-based compensation
|
|
15
|
|
|
—
|
|
Shares repurchased
|
|
(327
|
)
|
|
—
|
|
Dividends declared
|
|
(663
|
)
|
|
(16
|
)
|
Other
|
|
(1
|
)
|
|
—
|
|
Balance at June 30, 2016
|
|
$
|
196
|
|
|
$
|
228
|
|
During the
six months ended
June 30, 2016
, we repurchased
2.3
million shares at a total cost of
$300
pursuant to a share repurchase program authorized by our Board of Directors.
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 is 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 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
six months ended
June 30, 2016
was primarily due to the strengthening of most foreign currencies versus the U.S. dollar, including the Brazilian real, Australian dollar, Russian ruble, South Korean won and the Canadian dollar, partially offset by the weakening of the British pound sterling.
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, 2014
|
|
$
|
(1,335
|
)
|
|
$
|
(1,924
|
)
|
|
$
|
(37
|
)
|
|
$
|
(16
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(310
|
)
|
|
9
|
|
|
7
|
|
|
16
|
|
(Income) loss reclassified from AOCI
|
|
—
|
|
|
844
|
|
(a)
|
—
|
|
|
(21
|
)
|
Net current period other comprehensive income (loss)
|
|
(310
|
)
|
|
853
|
|
|
7
|
|
|
(5
|
)
|
Shares purchased from noncontrolling interest and other
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
Balance as of June 30, 2015
|
|
$
|
(1,657
|
)
|
|
$
|
(1,071
|
)
|
|
$
|
(30
|
)
|
|
$
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
(2,252
|
)
|
|
$
|
(1,013
|
)
|
|
$
|
(3
|
)
|
|
$
|
(10
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
132
|
|
|
2
|
|
|
(9
|
)
|
|
6
|
|
(Income) loss reclassified from AOCI
|
|
—
|
|
|
14
|
|
(a)
|
—
|
|
|
(13
|
)
|
Net current period other comprehensive income (loss)
|
|
132
|
|
|
16
|
|
|
(9
|
)
|
|
(7
|
)
|
Balance as of June 30, 2016
|
|
$
|
(2,120
|
)
|
|
$
|
(997
|
)
|
|
$
|
(12
|
)
|
|
$
|
(17
|
)
|
|
|
(a)
|
Included in computation of net periodic pension costs (see Note
4
).
|
During the
first quarter
of
2015
, we acquired the remaining
49.9
percent interest in our subsidiary in Israel, Hogla-Kimberly, Ltd., for
$151
. As our subsidiary in Turkey was wholly-owned by our subsidiary in Israel, through this acquisition we also effectively acquired the remaining
49.9
percent interest in our subsidiary in Turkey, Kimberly-Clark Tuketim Mallari Sanayi ve Ticaret A.s.
The purchase of additional ownership in an already controlled subsidiary is treated as an equity transaction with no gain or loss recognized in consolidated net income or comprehensive income. The effect of the change in ownership interest is as follows:
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
Net income attributable to Kimberly-Clark Corporation
|
|
$
|
163
|
|
Decrease in Kimberly-Clark Corporation's additional paid-in capital for acquisition
|
|
(94
|
)
|
Change from net income attribution to Kimberly-Clark Corporation and transfers to noncontrolling interests
|
|
$
|
69
|
|
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. We enter into derivative instruments 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 and qualify as cash flow 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.
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 and qualify as fair value hedges. From time to time, we also hedge the anticipated issuance of fixed-rate debt, using forward-starting swaps, and these contracts are designated as cash flow hedges.
We use derivative instruments, such as forward swap 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.
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 borrowing. Translation exposure, which results from changes in translation rates between functional currencies and the U.S. dollar,
generally is not hedged. However, consistent with other years, a portion of our net investment in our Mexican affiliate has been hedged. At
June 30, 2016
, we had in place net investment hedges of
$89
for a portion of our investment in our Mexican affiliate.
Set forth below is a summary of the designated and undesignated fair values of our derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
June 30,
2016
|
|
December 31,
2015
|
|
June 30,
2016
|
|
December 31,
2015
|
Foreign currency exchange contracts
|
$
|
42
|
|
|
$
|
56
|
|
|
$
|
35
|
|
|
$
|
27
|
|
Interest rate contracts
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commodity price contracts
|
2
|
|
|
—
|
|
|
6
|
|
|
15
|
|
Total
|
$
|
51
|
|
|
$
|
56
|
|
|
$
|
41
|
|
|
$
|
42
|
|
The derivative assets are included in the Consolidated Balance Sheet in other current assets and other assets, as appropriate. The derivative liabilities are included in the Consolidated Balance Sheet in accrued expenses and other liabilities, as appropriate.
Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk. The fair values of these derivative instruments are recorded as an asset or liability, as appropriate, with the offset recorded in current earnings. The offset to the change in fair values of the related hedged items also is recorded in current earnings. 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. At
June 30, 2016
, the aggregate notional values of outstanding interest rate contracts designated as fair value hedges were
$375
.
Fair value hedges resulted in no significant ineffectiveness in the six months ended June 30, 2016 and 2015
.
For the six months ended June 30, 2016 and 2015, gains or losses recognized in interest expense for interest rate swaps were not significant.
For the
six
month periods ended
June 30, 2016
and
2015
,
no
gain or loss was recognized in earnings as a result of a hedged firm commitment no longer qualifying as a fair value hedge.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of 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 period that the hedged exposure affects earnings. As of
June 30, 2016
, 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
2016
and future periods. As of
June 30, 2016
, the aggregate notional value of outstanding foreign exchange derivative contracts designated as cash flow hedges was
$795
, and there were
no
outstanding interest rate derivative contracts designated as cash flow hedges.
Cash flow hedges resulted in no significant ineffectiveness for the six months ended June 30, 2016 and 2015
. For the
six
months ended
June 30, 2016
and
2015
,
no
gains or losses were reclassified into earnings as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At
June 30, 2016
, amounts to be reclassified from AOCI during the next twelve months are not expected to be material. The maximum maturity of cash flow hedges in place at
June 30, 2016
is
December 2018
.
Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in other (income) and expense, net. A loss of
$14
and a gain of
$74
were recorded in the
three months ended
June 30, 2016
and
2015
, respectively. A gain of
$14
and a loss of
$81
were recorded in the
six months ended
June 30, 2016
and
2015
, respectively. The effect on earnings from the use of these non-designated derivatives is substantially neutralized by the transactional gains and losses recorded on the underlying assets and liabilities. At
June 30, 2016
, the notional amount of these undesignated derivative instruments was
$2 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 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 the business segments.
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, Kotex, U by Kotex, Intimus, Depend, Plenitud, Poise and other brand names.
|
|
|
•
|
Consumer Tissue
offers a wide variety of innovative solutions and trusted brands that touch and improve people's lives every day. 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 Jackson Safety, are well-known for quality and trusted to help people around the world work better.
|
The following schedules present information concerning consolidated operations by business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
Six Months Ended June 30
|
|
|
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
NET SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Care
|
|
$
|
2,279
|
|
|
$
|
2,306
|
|
|
-1.2
|
%
|
|
$
|
4,486
|
|
|
$
|
4,614
|
|
|
-2.8
|
%
|
Consumer Tissue
|
|
1,494
|
|
|
1,499
|
|
|
-0.3
|
%
|
|
2,990
|
|
|
3,073
|
|
|
-2.7
|
%
|
K-C Professional
|
|
806
|
|
|
822
|
|
|
-1.9
|
%
|
|
1,569
|
|
|
1,617
|
|
|
-3.0
|
%
|
Corporate & Other
|
|
9
|
|
|
16
|
|
|
N.M.
|
|
|
19
|
|
|
30
|
|
|
N.M.
|
|
TOTAL NET SALES
|
|
$
|
4,588
|
|
|
$
|
4,643
|
|
|
-1.2
|
%
|
|
$
|
9,064
|
|
|
$
|
9,334
|
|
|
-2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Care
|
|
$
|
455
|
|
|
$
|
473
|
|
|
-3.8
|
%
|
|
$
|
904
|
|
|
$
|
928
|
|
|
-2.6
|
%
|
Consumer Tissue
|
|
275
|
|
|
260
|
|
|
+5.8
|
%
|
|
555
|
|
|
551
|
|
|
+0.7
|
%
|
K-C Professional
|
|
150
|
|
|
145
|
|
|
+3.4
|
%
|
|
300
|
|
|
279
|
|
|
+7.5
|
%
|
Corporate & Other
|
|
(63
|
)
|
|
(90
|
)
|
|
N.M.
|
|
|
(128
|
)
|
|
(160
|
)
|
|
N.M.
|
|
Other (income) and expense, net
(a)
|
|
(21
|
)
|
|
1,332
|
|
|
N.M.
|
|
|
(11
|
)
|
|
1,394
|
|
|
N.M.
|
|
TOTAL OPERATING PROFIT (LOSS)
|
|
$
|
838
|
|
|
$
|
(544
|
)
|
|
N.M.
|
|
|
$
|
1,642
|
|
|
$
|
204
|
|
|
N.M.
|
|
N.M. - Not Meaningful
|
|
(a)
|
Other (income) and expense, net includes charges related to pension settlements of
$1,322
and
$1,331
for the
three and six
months ended
June 30, 2015
, respectively. See Note 4 for additional information.
|
Note 9
. Supplemental Balance Sheet Data
The following schedule presents a summary of inventories by major class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
(Summary of Inventories by Major Class)
|
|
LIFO
|
|
Non-LIFO
|
|
Total
|
|
LIFO
|
|
Non-LIFO
|
|
Total
|
Raw materials
|
|
$
|
94
|
|
|
$
|
265
|
|
|
$
|
359
|
|
|
$
|
100
|
|
|
$
|
297
|
|
|
$
|
397
|
|
Work in process
|
|
106
|
|
|
97
|
|
|
203
|
|
|
110
|
|
|
93
|
|
|
203
|
|
Finished goods
|
|
472
|
|
|
659
|
|
|
1,131
|
|
|
525
|
|
|
689
|
|
|
1,214
|
|
Supplies and other
|
|
—
|
|
|
281
|
|
|
281
|
|
|
—
|
|
|
278
|
|
|
278
|
|
|
|
672
|
|
|
1,302
|
|
|
1,974
|
|
|
735
|
|
|
1,357
|
|
|
2,092
|
|
Excess of FIFO or weighted-average cost over
LIFO cost
|
|
(167
|
)
|
|
—
|
|
|
(167
|
)
|
|
(183
|
)
|
|
—
|
|
|
(183
|
)
|
Total
|
|
$
|
505
|
|
|
$
|
1,302
|
|
|
$
|
1,807
|
|
|
$
|
552
|
|
|
$
|
1,357
|
|
|
$
|
1,909
|
|
Inventories are valued at the lower of cost and 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:
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Land
|
$
|
166
|
|
|
$
|
164
|
|
Buildings
|
2,609
|
|
|
2,537
|
|
Machinery and equipment
|
13,621
|
|
|
13,393
|
|
Construction in progress
|
393
|
|
|
453
|
|
|
16,789
|
|
|
16,547
|
|
Less accumulated depreciation
|
(9,601
|
)
|
|
(9,443
|
)
|
Total
|
$
|
7,188
|
|
|
$
|
7,104
|
|