NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1
. Accounting Policies
Basis of Presentation
The consolidated financial statements present the accounts of Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest as if they were a single economic entity in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany transactions and accounts are eliminated in consolidation. The terms "Corporation," "Kimberly-Clark," "we," "our," and "us" refer to Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
In 2014, we completed the spin-off of our health care business, creating a stand-alone, publicly traded health care company, Halyard Health, Inc. ("Halyard"), by distributing 100 percent of the outstanding shares of Halyard to holders of our common stock. See
Note 3
for more information.
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 2015 and other income of
$11
related to an updated assessment in 2016. In addition, we recorded a non-deductible charge of
$45
and
$462
in 2015 and 2014, respectively, related to a balance sheet remeasurement. Net sales of K-C Venezuela were insignificant in 2015 and 2014.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in these estimates are recorded when known. Estimates are used in accounting for, among other things, sales incentives and trade promotion allowances, employee postretirement benefits, and deferred income taxes and potential assessments.
Cash Equivalents
Cash equivalents are short-term investments with an original maturity date of three months or less.
Inventories and Distribution Costs
Most U.S. inventories are valued at the lower of cost, using the Last-In, First-Out ("LIFO") method, or market. The balance of the U.S. inventories and inventories of consolidated operations outside the U.S. are valued at the lower of cost and net realizable value using either the First-In, First-Out ("FIFO") or weighted-average cost methods. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Distribution costs are classified as cost of products sold.
Property and Depreciation
Property, plant and equipment are stated at cost and are depreciated on the straight-line method. Buildings are depreciated over their estimated useful lives, primarily
40 years
. Machinery and equipment are depreciated over their estimated useful lives, primarily ranging from
16
to
20 years
. Purchases of computer software, including external costs and certain internal costs (including payroll and payroll-related costs of employees) directly associated with developing significant computer software applications for internal use, are capitalized. Computer software costs are amortized on the straight-line method over the estimated useful life of the software, which generally does not exceed
5 years
.
Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group, which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group
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over its fair value. Fair value is measured using discounted cash flows or independent appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss on the transaction is included in income.
Goodwill and Other Intangible Assets
Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not amortized, but rather is assessed for impairment annually and whenever events and circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit carrying amount of goodwill with its fair value. If the reporting unit carrying amount of goodwill exceeds its fair value, an impairment charge would be recorded. In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as macroeconomic, industry and competitive conditions, legal and regulatory environment, historical and projected financial performance, significant changes in the reporting unit and the magnitude of excess fair value over carrying amount from the previous quantitative impairment testing. If the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test using discounted cash flows to estimate fair value must be performed. On the other hand, if the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is more than its carrying value, then further quantitative testing is not required. For
2016
, we completed the required annual assessment of goodwill for impairment for all of our reporting units using a qualitative assessment as of the first day of the third quarter, and determined that it is more likely than not that the fair value is more than the carrying amount for each of our reporting units.
Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Estimated useful lives range from
2
to
20 years
for trademarks,
5
to
15 years
for patents and developed technologies, and
5
to
15 years
for other intangible assets. An impairment loss would be indicated when estimated undiscounted future cash flows from the use of the asset are less than its carrying amount. An impairment loss would be measured as the difference between the fair value (based on discounted future cash flows) and the carrying amount of the asset.
Investments in Equity Companies
Investments in companies which we do not control but over which we have the ability to exercise significant influence and that, in general, are at least
20
percent-owned by us, are stated at cost plus equity in undistributed net income. These investments are evaluated for impairment when warranted. An impairment loss would be recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other than temporary. In judging "other than temporary," we would consider the length of time and extent to which the fair value of the equity company investment has been less than the carrying amount, the near-term and longer-term operating and financial prospects of the equity company, and our longer-term intent of retaining the investment in the equity company.
Revenue Recognition
Sales revenue is recognized at the time of product shipment or delivery, depending on when title passes, to unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and collection is reasonably assured. Sales are reported net of returns, consumer and trade promotions, rebates and freight allowed. Taxes imposed by governmental authorities on our revenue-producing activities with customers, such as sales taxes and value-added taxes, are excluded from net sales.
Sales Incentives and Trade Promotion Allowances
The cost of promotion activities provided to customers is classified as a reduction in sales revenue. In addition, the estimated redemption value of consumer coupons is recorded at the time the coupons are issued and classified as a reduction in sales revenue. Rebate and promotion accruals are based on estimates of the quantity of customer sales and the promotion accruals also consider estimates of the number of consumer coupons that will be redeemed and timing and costs of activities within the promotional programs.
Advertising Expense
Advertising costs are expensed in the year the related advertisement or campaign is first presented by the media. For interim reporting purposes, advertising expenses are charged to operations as a percentage of sales based on estimated sales and related advertising expense for the full year.
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Research Expense
Research and development costs are charged to expense as incurred.
Foreign Currency Translation
The income statements of foreign operations, other than those in highly inflationary economies, are translated into U.S. dollars at rates of exchange in effect each month. The balance sheets of these operations are translated at period-end exchange rates, and the differences from historical exchange rates are reflected in stockholders' equity as unrealized translation adjustments.
Derivative Instruments and Hedging
Our policies allow the use of derivatives for risk management purposes and prohibit their use for speculation. Our policies also prohibit the use of any leveraged derivative instrument. Consistent with our policies, foreign currency derivative instruments, interest rate swaps and locks, and the majority of commodity hedging contracts are entered into with major financial institutions. At inception we formally designate certain derivatives as cash flow, fair value or net investment hedges and establish how the effectiveness of these hedges will be assessed and measured. This process links the derivatives to the transactions or financial balances they are hedging. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings as they occur. All derivative instruments are recorded as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are either recorded in the income statement or other comprehensive income, as appropriate. The gain or loss on derivatives designated as fair value hedges and the offsetting loss or gain on the hedged item attributable to the hedged risk are included in income in the period that changes in fair value occur. The effective portion of the gain or loss on derivatives designated as cash flow hedges is included in other comprehensive income in the period that changes in fair value occur, and is reclassified to income in the same period that the hedged item affects income. The gain or loss on derivatives designated as hedges of investments in foreign subsidiaries is recognized in other comprehensive income to offset the change in value of the net investments being hedged. Any ineffective portion of cash flow hedges and net investment hedges is immediately recognized in income. Certain foreign-currency derivative instruments not designated as hedging instruments have been entered into to manage a portion of our foreign currency transactional exposures. The gain or loss on these derivatives is included in income in the period that changes in their fair values occur. See
Note 13
for disclosures about derivative instruments and hedging activities.
New Accounting Standards
In 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("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 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. 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. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
providing guidance on eight specific cash flow statement classification matters. The amendments in this standard are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this standard should be applied using a retrospective transition method to each period presented. We will early adopt this ASU as of January 2017. 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. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for all entities as of the
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beginning of a fiscal year for which neither the annual or interim (if applicable) financial statements have been issued. The ASU should be applied on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption. The effects of this standard on our financial position, results of operations and cash flows are not yet known.
In 2015, the FASB issued ASU No. 2015-07,
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)
, which amends ASC 820,
Fair Value Measurement
. This ASU removes the requirement to categorize within the fair value hierarchy investments without readily determinable fair values in entities that elect to measure fair value using net asset value per share or its equivalent. The ASU requires that sufficient information be provided to permit reconciliation of the fair value of assets categorized within the fair value hierarchy to the amounts presented in the statement of financial position. We adopted this ASU in 2016 retrospectively. See Notes 5 and 9 for disclosure of investments that use net asset value per share or its equivalent to measure fair value.
In 2015, the FASB issued 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 and our 2016 consolidated balance sheet reflects the new guidance for classification of deferred taxes. Prior periods were not recasted.
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. We will adopt this ASU effective January 1, 2018. The guidance is required to be adopted on either a full or modified retrospective basis. As this standard is not expected to have a material impact on our financial position, results of operations and cash flows on either a full or modified retrospective basis, we do not plan to recast prior periods.
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 was 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 restructuring impacted all of our business segments and our organizations in all major geographies.
The restructuring actions were completed by
December 31, 2016
, with total costs, primarily severance, of
$164
after tax (
$231
pre-tax). Charges were recorded in the following income statement line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
Cost of products sold
|
$
|
6
|
|
|
$
|
23
|
|
|
$
|
40
|
|
Marketing, research and general expenses
|
32
|
|
|
40
|
|
|
93
|
|
Other (income) and expense, net
|
(3
|
)
|
|
—
|
|
|
—
|
|
Provision for income taxes
|
(8
|
)
|
|
(21
|
)
|
|
(38
|
)
|
Net charges
|
$
|
27
|
|
|
$
|
42
|
|
|
$
|
95
|
|
Cash payments of
$60
and
$86
were made during
2016
and
2015
, respectively.
Note 3
. Spin-Off of Health Care Business and Related Costs
On October 31, 2014, we completed the spin-off of our health care business, and each of our stockholders of record as of the close of business on October 23, 2014 (the "Record Date") received one share of Halyard common stock for every
8
shares of our common stock held as of the Record Date. The distribution was structured to be tax free to our U.S. stockholders for U.S. federal income tax purposes. After the distribution, we do not beneficially own any shares of Halyard common stock.
To evaluate, plan and execute the spin-off, we incurred
$157
of pre-tax charges (
$138
after tax) in transaction and related costs, including the exit of one of Halyard's health care glove manufacturing facilities in Thailand and outsourcing of the related production. These charges and the related tax impact are recorded in Income from discontinued operations, net of income taxes.
|
|
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Note 4
. European Strategic Changes
In 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. Restructuring actions related to the strategic changes involved the sale or closure of
five
of our European manufacturing facilities and streamlining of our administrative organization. After tax charges of
$30
were incurred in connection with the European strategic changes in 2014.
Note 5
. 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
2016
and
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
$61
and
$57
at
December 31, 2016
and
2015
, respectively. The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in other assets. The COLI policies are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.
At
December 31, 2016
and
2015
, derivative assets were
$43
and
$56
, respectively, and derivative liabilities were
$46
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 13
.
Redeemable preferred securities of subsidiaries are measured on a recurring basis at fair value and were
$58
and
$64
at December 31, 2016 and 2015, respectively. 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.
|
|
|
|
|
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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
|
|
|
December 31, 2016
|
|
December 31, 2015
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
(a)
|
1
|
|
$
|
923
|
|
|
$
|
923
|
|
|
$
|
619
|
|
|
$
|
619
|
|
Time deposits and other
(b)
|
1
|
|
138
|
|
|
138
|
|
|
124
|
|
|
124
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Short-term debt
(c)
|
2
|
|
170
|
|
|
170
|
|
|
1,071
|
|
|
1,071
|
|
Long-term debt
(d)
|
2
|
|
7,402
|
|
|
7,886
|
|
|
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 6
. Intangible Assets
The changes in the carrying amount of goodwill by business segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Care
|
|
Consumer
Tissue
|
|
K-C
Professional
|
|
Total
|
Balance at December 31, 2014
|
$
|
625
|
|
|
$
|
594
|
|
|
$
|
409
|
|
|
$
|
1,628
|
|
Currency
|
(92
|
)
|
|
(70
|
)
|
|
(20
|
)
|
|
(182
|
)
|
Balance at December 31, 2015
|
533
|
|
|
524
|
|
|
389
|
|
|
1,446
|
|
Currency
|
16
|
|
|
14
|
|
|
4
|
|
|
34
|
|
Balance at December 31, 2016
|
$
|
549
|
|
|
$
|
538
|
|
|
$
|
393
|
|
|
$
|
1,480
|
|
Intangible assets subject to amortization consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
Trademarks
|
$
|
108
|
|
|
$
|
79
|
|
|
$
|
109
|
|
|
$
|
77
|
|
Patents and developed technologies
|
47
|
|
|
14
|
|
|
47
|
|
|
11
|
|
Other
|
58
|
|
|
37
|
|
|
60
|
|
|
34
|
|
Total
|
$
|
213
|
|
|
$
|
130
|
|
|
$
|
216
|
|
|
$
|
122
|
|
|
|
|
|
|
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|
Note 7
. Debt and Redeemable Preferred Securities of Subsidiaries
Long-term debt is composed of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
Average
Interest
Rate
|
|
Maturities
|
|
December 31
|
|
2016
|
|
2015
|
Notes and debentures
|
4.3%
|
|
2017 - 2046
|
|
$
|
7,101
|
|
|
$
|
6,396
|
|
Industrial development revenue bonds
|
0.2%
|
|
2018 - 2045
|
|
264
|
|
|
264
|
|
Bank loans and other financings in various currencies
|
5.4%
|
|
2017 - 2028
|
|
37
|
|
|
44
|
|
Total long-term debt
|
|
|
|
|
7,402
|
|
|
6,704
|
|
Less current portion
|
|
|
|
|
963
|
|
|
598
|
|
Long-term portion
|
|
|
|
|
$
|
6,439
|
|
|
$
|
6,106
|
|
Scheduled maturities of long-term debt for the next five years are
$965
in
2017
,
$936
in
2018
,
$711
in
2019
,
$757
in
2020
and
$249
in
2021
.
In
July 2016
, we issued
$500
aggregate principal amount of
3.20%
notes due
July 30, 2046
. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding commercial paper indebtedness.
In
February 2016
, we issued
$400
aggregate principal amount of
1.40%
notes due
February 15, 2019
and
$400
aggregate principal amount of
2.75%
notes due
February 15, 2026
. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding notes and commercial paper indebtedness.
In
August 2015
, we issued
$250
aggregate principal amount of
2.15%
notes due
August 2020
and
$300
aggregate principal amount of
3.05%
notes due
August 2025
. Proceeds from the offering were used to repay
$300
of notes due in August 2015 and to pay down a portion of our outstanding commercial paper balance.
In
February 2015
, we issued
$250
aggregate principal amount of
1.85%
notes due
March 2020
and
$250
aggregate principal amount of
2.65%
notes due
March 2025
. Proceeds from the offering were used for general corporate purposes, including pension contribution payments.
In 2015, at our election, we redeemed
$200
of dealer remarketable securities.
In
October 2014
, we issued debt of
$640
aggregate principal amount that was transferred to Halyard as part of the spin-off.
In
May 2014
, we issued
$300
aggregate principal amount of
floating rate
notes due
May 19, 2016
and
$300
aggregate principal amount of
1.9%
notes due
May 22, 2019
. Proceeds from the offering were used for general corporate purposes and repurchases of common stock.
We maintain a
$2.0 billion
revolving credit facility which expires in
2021
. This facility, currently unused, supports our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.
Redeemable Preferred Securities of Subsidiaries
Our subsidiary in Central America has outstanding redeemable securities that are held by a noncontrolling interest and another noncontrolling interest holds certain redeemable preferred securities issued by one of our subsidiaries in North America. In December 2014, we redeemed
$0.5
billion preferred securities in our Luxembourg-based financing subsidiary, and accordingly, the subsidiary became wholly-owned by Kimberly-Clark.
|
|
|
|
|
39
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Note 8
. Stock-Based Compensation
We have a stock-based Equity Participation Plan and an Outside Directors' Compensation Plan (the "Plans"), under which we can grant stock options, restricted shares and restricted share units to employees and outside directors. As of
December 31, 2016
, the number of shares of common stock available for grants under the Plans aggregated
18 million
shares.
Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant, and they have a term of
10
years. Stock options are subject to graded vesting whereby options vest
30
percent at the end of each of the first two 12-month periods following the grant and
40 percent
at the end of the third 12-month period.
Restricted shares, time-vested restricted share units and performance-based restricted share units granted to employees are valued at the closing market price of our common stock on the grant date and vest generally at the end of
three
years. The number of performance-based share units that ultimately vest ranges from
zero
to
200 percent
of the number granted, based on performance tied to return on invested capital ("ROIC") and net sales during the three-year performance period. ROIC and net sales targets are set at the beginning of the performance period. Restricted share units granted to outside directors are valued at the closing market price of our common stock on the grant date and vest when they are granted. The restricted period begins on the date of grant and expires on the date the outside director retires from or otherwise terminates service on our Board.
At the time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units on the same date and at the same rate as dividends are paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings.
Stock-based compensation costs of
$77
,
$75
and
$52
and related deferred income tax benefits of
$28
,
$29
and
$19
were recognized for
2016
,
2015
and
2014
, respectively.
The fair value of stock option awards was determined using a Black-Scholes-Merton option-pricing model utilizing a range of assumptions related to dividend yield, volatility, risk-free interest rate, and employee exercise behavior. Dividend yield is based on historical experience and expected future dividend actions. Expected volatility is based on a blend of historical volatility and implied volatility from traded options on Kimberly-Clark's common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate forfeitures based on historical data.
The weighted-average fair value of options granted was estimated at
$10.95
,
$7.39
and
$7.89
, in
2016
,
2015
and
2014
, respectively, per option on the date of grant based on the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
Dividend yield
|
3.1
|
%
|
|
3.5
|
%
|
|
3.5
|
%
|
Volatility
|
16.0
|
%
|
|
13.4
|
%
|
|
13.4
|
%
|
Risk-free interest rate
|
1.2
|
%
|
|
1.5
|
%
|
|
1.7
|
%
|
Expected life - years
|
4.6
|
|
|
4.8
|
|
|
5.0
|
|
Total remaining unrecognized compensation costs and amortization period are as follows:
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Weighted-Average
Service Years
|
Nonvested stock options
|
$
|
10
|
|
|
1.4
|
Restricted shares and time-vested restricted share units
|
6
|
|
|
1.5
|
Nonvested performance-based restricted share units
|
53
|
|
|
1.8
|
Excess tax benefits, resulting from tax deductions in excess of the compensation cost recognized, aggregating
$19
,
$37
and
$37
were classified as other cash inflows under Financing Activities in the consolidated cash flow statement for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
|
|
|
|
|
40
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
A summary of stock-based compensation is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
Shares
(in thousands)
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining Contractual Term
|
|
Aggregate Intrinsic
Value
|
Outstanding at January 1, 2016
|
6,590
|
|
|
$
|
92.35
|
|
|
|
|
|
Granted
|
1,627
|
|
|
126.17
|
|
|
|
|
|
Exercised
|
(1,249
|
)
|
|
85.75
|
|
|
|
|
|
Forfeited or expired
|
(175
|
)
|
|
112.24
|
|
|
|
|
|
Outstanding at December 31, 2016
|
6,793
|
|
|
101.16
|
|
|
6.62
|
|
$
|
107
|
|
Exercisable at December 31, 2016
|
3,667
|
|
|
86.87
|
|
|
4.86
|
|
$
|
100
|
|
The total intrinsic value of options exercised during the years ended
December 31, 2016
,
2015
and
2014
was
$55
,
$83
and
$79
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Vested
Restricted Share Units
|
|
Performance-Based
Restricted Share Units
|
Other Stock-Based Awards
|
Shares
(in thousands)
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Shares
(in thousands)
|
|
Weighted-
Average
Grant-Date
Fair Value
|
Nonvested at January 1, 2016
|
102
|
|
|
$
|
108.91
|
|
|
1,761
|
|
|
$
|
107.51
|
|
Granted
|
75
|
|
|
120.96
|
|
|
625
|
|
|
126.05
|
|
Vested
|
(61
|
)
|
|
107.17
|
|
|
(646
|
)
|
|
101.17
|
|
Forfeited
|
(5
|
)
|
|
116.53
|
|
|
(98
|
)
|
|
113.41
|
|
Nonvested at December 31, 2016
|
111
|
|
|
117.63
|
|
|
1,642
|
|
|
116.53
|
|
The total fair value of restricted share units that were distributed to participants during
2016
,
2015
and
2014
was
$83
,
$99
and
$102
, respectively.
Note 9
. Employee Postretirement Benefits
Substantially all regular employees in the U.S. and the United Kingdom are covered by defined benefit pension plans (the "Principal Plans") and/or defined contribution retirement plans. Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for our qualified defined benefit pension plans is to contribute assets at least equal in amount to regulatory minimum requirements. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded.
Substantially all U.S. retirees and employees have access to our unfunded healthcare and life insurance benefit plans. The annual increase in the consolidated weighted-average healthcare cost trend rate is expected to be
6.0
percent in
2017
and to decline to
4.6
percent in
2028
and thereafter. Assumed healthcare cost trend rates affect the amounts reported for postretirement healthcare benefit plans. A one-percentage-point change in assumed healthcare trend rates would not have a significant effect on our financial results.
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
pre-tax in other (income) and expense, net) during
2015
, mostly in the second quarter. In
2015
, we made cash contributions of
$410
related to these changes to the U.S. plan.
|
|
|
|
|
41
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Summarized financial information about postretirement plans, excluding defined contribution retirement plans, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
3,959
|
|
|
$
|
6,860
|
|
|
$
|
717
|
|
|
$
|
788
|
|
Service cost
|
42
|
|
|
38
|
|
|
11
|
|
|
12
|
|
Interest cost
|
148
|
|
|
187
|
|
|
33
|
|
|
32
|
|
Actuarial loss (gain)
|
501
|
|
|
(150
|
)
|
|
41
|
|
|
(53
|
)
|
Currency and other
|
(304
|
)
|
|
(139
|
)
|
|
9
|
|
|
(8
|
)
|
Benefit payments from plans
|
(202
|
)
|
|
(235
|
)
|
|
—
|
|
|
—
|
|
Direct benefit payments
|
(15
|
)
|
|
(12
|
)
|
|
(53
|
)
|
|
(54
|
)
|
Settlements
|
(3
|
)
|
|
(2,590
|
)
|
|
—
|
|
|
—
|
|
Benefit obligation at end of year
|
4,126
|
|
|
3,959
|
|
|
758
|
|
|
717
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
3,508
|
|
|
5,914
|
|
|
—
|
|
|
—
|
|
Actual return on plan assets
|
413
|
|
|
54
|
|
|
—
|
|
|
—
|
|
Employer contributions
|
108
|
|
|
484
|
|
|
—
|
|
|
—
|
|
Currency and other
|
(290
|
)
|
|
(119
|
)
|
|
—
|
|
|
—
|
|
Benefit payments
|
(202
|
)
|
|
(235
|
)
|
|
—
|
|
|
—
|
|
Settlements
|
(3
|
)
|
|
(2,590
|
)
|
|
—
|
|
|
—
|
|
Fair value of plan assets at end of year
|
3,534
|
|
|
3,508
|
|
|
—
|
|
|
—
|
|
Funded Status
|
$
|
(592
|
)
|
|
$
|
(451
|
)
|
|
$
|
(758
|
)
|
|
$
|
(717
|
)
|
Substantially all of the funded status of pension and other benefits is recognized in the consolidated balance sheet in noncurrent employee benefits, and the remainder is recognized in accrued expenses and other assets.
Information for the Principal Plans and All Other Pension Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Plans
|
|
All Other
Pension Plans
|
|
Total
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Projected benefit obligation (“PBO”)
|
$
|
3,427
|
|
|
$
|
3,295
|
|
|
$
|
699
|
|
|
$
|
664
|
|
|
$
|
4,126
|
|
|
$
|
3,959
|
|
Accumulated benefit obligation (“ABO”)
|
3,378
|
|
|
3,253
|
|
|
622
|
|
|
594
|
|
|
4,000
|
|
|
3,847
|
|
Fair value of plan assets
|
3,011
|
|
|
3,019
|
|
|
523
|
|
|
489
|
|
|
3,534
|
|
|
3,508
|
|
Approximately one-half of the PBO and fair value of plan assets for the Principal Plans relate to the U.S. qualified and nonqualified pension plans.
Information for Pension Plans with an ABO in Excess of Plan Assets
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2016
|
|
2015
|
PBO
|
$
|
3,807
|
|
|
$
|
2,115
|
|
ABO
|
3,736
|
|
|
2,096
|
|
Fair value of plan assets
|
3,243
|
|
|
1,696
|
|
|
|
|
|
|
42
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Service cost
|
$
|
42
|
|
|
$
|
38
|
|
|
$
|
46
|
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
13
|
|
Interest cost
|
148
|
|
|
187
|
|
|
279
|
|
|
33
|
|
|
32
|
|
|
35
|
|
Expected return on plan assets
(a)
|
(158
|
)
|
|
(215
|
)
|
|
(332
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
52
|
|
|
75
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
1
|
|
|
1,357
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
(9
|
)
|
|
(10
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Net periodic benefit cost
|
$
|
76
|
|
|
$
|
1,432
|
|
|
$
|
110
|
|
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
47
|
|
|
|
(a)
|
The expected return on plan assets is determined by multiplying the fair value of plan assets at the remeasurement date, typically the prior year-end adjusted for estimated current year cash benefit payments and contributions, by the expected long-term rate of return.
|
Weighted-Average Assumptions Used to Determine Net Cost for Years Ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
Projected 2017
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
3.19
|
%
|
|
3.91
|
%
|
|
3.86
|
%
|
|
4.66
|
%
|
|
4.59
|
%
|
|
4.28
|
%
|
|
4.97
|
%
|
Expected long-term return on plan assets
|
4.46
|
%
|
|
4.84
|
%
|
|
5.21
|
%
|
|
5.98
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Rate of compensation increase
|
2.29
|
%
|
|
2.32
|
%
|
|
2.63
|
%
|
|
2.67
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Discount rate
|
3.19
|
%
|
|
3.91
|
%
|
|
4.29
|
%
|
|
4.59
|
%
|
Rate of compensation increase
|
2.29
|
%
|
|
2.32
|
%
|
|
—
|
|
|
—
|
|
Investment Strategies for the Principal Plans
Strategic asset allocation decisions are made considering several risk factors, including plan participants' retirement benefit security, the estimated payments of the associated liabilities, the plan funded status, and Kimberly-Clark's financial condition. The resulting strategic asset allocation is a diversified blend of equity and fixed income investments. Equity investments are typically diversified across geographies and market capitalization. Fixed income investments are diversified across multiple sectors including government issues and corporate debt instruments with a portfolio duration that is consistent with the estimated payment of the associated liability. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. Our
2017
target plan asset allocation for the Principal Plans is
70
percent fixed income securities and
30
percent equity securities.
The expected long-term rate of return is evaluated on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was
5.10
percent in
2016
compared with
5.35
percent in
2015
and will be
4.72
percent in
2017
.
|
|
|
|
|
43
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Set forth below are the pension plan assets of the Principal Plans measured at fair value, by level in the fair-value hierarchy. More than 90 percent of the assets are held in pooled funds and are measured using a net asset value (or its equivalent). Accordingly, such assets do not meet the Level 1, Level 2, or Level 3 criteria of the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016
|
|
Total
Plan Assets
|
|
Assets at Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Assets at Significant
Observable
Inputs
(Level 2)
|
Cash and Cash Equivalents
|
|
|
|
|
|
Held directly
|
$
|
33
|
|
|
$
|
33
|
|
|
$
|
—
|
|
Held through mutual and pooled funds measured at net asset value
|
17
|
|
|
—
|
|
|
—
|
|
Fixed Income
|
|
|
|
|
|
Held directly
|
|
|
|
|
|
U.S. government and municipals
|
122
|
|
|
122
|
|
|
—
|
|
Held through mutual and pooled funds measured at net asset value
|
|
|
|
|
|
U.S. government and municipals
|
128
|
|
|
—
|
|
|
—
|
|
U.S. corporate debt
|
648
|
|
|
—
|
|
|
—
|
|
International bonds
|
1,223
|
|
|
—
|
|
|
—
|
|
Equity
|
|
|
|
|
|
Held directly
|
|
|
|
|
|
U.S. equity
|
41
|
|
|
41
|
|
|
—
|
|
International equity
|
44
|
|
|
44
|
|
|
—
|
|
Held through mutual and pooled funds measured at net asset value
|
|
|
|
|
|
Non-U.S. equity
|
68
|
|
|
—
|
|
|
—
|
|
Global equity
|
687
|
|
|
—
|
|
|
—
|
|
Total Plan Assets
|
$
|
3,011
|
|
|
$
|
240
|
|
|
$
|
—
|
|
For the U.S. pension plan, Treasury futures contracts are used when appropriate to manage duration targets. As of
December 31, 2016
and
December 31, 2015
, the U.S. plan had Treasury futures contracts in place with a total notional value of approximately
$216
and
$15
, respectively and an insignificant fair value.
|
|
|
|
|
44
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2015
|
|
Total
Plan Assets
|
|
Assets at Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Assets at Significant
Observable
Inputs
(Level 2)
|
Cash and Cash Equivalents
|
|
|
|
|
|
Held directly
|
$
|
14
|
|
|
$
|
12
|
|
|
$
|
2
|
|
Held through mutual and pooled funds measured at net asset value
|
34
|
|
|
—
|
|
|
—
|
|
Fixed Income
|
|
|
|
|
|
Held directly
|
|
|
|
|
|
U.S. government and municipals
|
157
|
|
|
141
|
|
|
16
|
|
U.S. corporate debt
|
21
|
|
|
—
|
|
|
21
|
|
Held through mutual and pooled funds measured at net asset value
|
|
|
|
|
|
U.S. government and municipals
|
149
|
|
|
—
|
|
|
—
|
|
U.S. corporate debt
|
623
|
|
|
—
|
|
|
—
|
|
International bonds
|
1,236
|
|
|
—
|
|
|
—
|
|
Equity
|
|
|
|
|
|
Held directly
|
|
|
|
|
|
U.S. equity
|
58
|
|
|
58
|
|
|
—
|
|
International equity
|
30
|
|
|
30
|
|
|
—
|
|
Held through mutual and pooled funds measured at net asset value
|
|
|
|
|
|
Non-U.S. equity
|
67
|
|
|
—
|
|
|
—
|
|
Global equity
|
630
|
|
|
—
|
|
|
—
|
|
Total Plan Assets
|
$
|
3,019
|
|
|
$
|
241
|
|
|
$
|
39
|
|
During
2016
and
2015
, the plan assets did not include a significant amount of Kimberly-Clark common stock.
Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. Substantially all of the equity securities held directly by the plans are actively traded and fair values are determined based on quoted market prices. Fair values of U.S. Treasury securities are determined based on trading activity in the marketplace.
Fair values of U.S. corporate debt, U.S. securitized fixed income and international bonds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations.
Fair values of equity securities and fixed income securities held through units of pooled funds are based on net asset value of the units of the pooled fund determined by the fund manager. Pooled funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors. The fair value of pooled funds is determined by the value of the underlying assets held by the fund and the units outstanding.
Equity securities held directly by the pension trusts and those held through units in pooled funds are monitored as to issuer and industry. Except for U.S. Treasuries, concentrations of fixed income securities are similarly monitored for concentrations by issuer and industry. As of
December 31, 2016
,
there were no significant concentrations of equity or debt securities in any single issuer or industry.
|
|
|
|
|
45
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
We expect to contribute up to
$100
to our defined benefit pension plans in
2017
. Over the next ten years, we expect that the following gross benefit payments will occur:
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
2017
|
$
|
225
|
|
|
$
|
59
|
|
2018
|
242
|
|
|
59
|
|
2019
|
239
|
|
|
60
|
|
2020
|
247
|
|
|
61
|
|
2021
|
248
|
|
|
62
|
|
2022-2026
|
1,236
|
|
|
303
|
|
Defined Contribution Pension Plans
Our 401(k) profit sharing plan and supplemental plan provide for a matching contribution of a U.S. employee's contributions and accruals, subject to predetermined limits, as well as a discretionary profit sharing contribution, in which contributions will be based on our profit performance. We also have defined contribution pension plans for certain employees outside the U.S. Costs charged to expense for our defined contribution pension plans were
$126
,
$107
and
$121
in
2016
,
2015
and
2014
, respectively. Approximately one-third of these costs were for plans outside the U.S.
Note 10
. Stockholders' Equity
During
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:
|
|
|
|
|
|
|
|
2015
|
Net Income Attributable to Kimberly-Clark Corporation
|
|
$
|
1,013
|
|
Decrease in Kimberly-Clark Corporation's additional paid-in capital for acquisition
|
|
(94
|
)
|
Change from net income attributable to Kimberly-Clark Corporation and transfers to noncontrolling interests
|
|
$
|
919
|
|
|
|
|
|
|
46
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Accumulated Other Comprehensive Income/Loss
The changes in the components of accumulated other comprehensive income ("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
|
|
(942
|
)
|
|
39
|
|
|
35
|
|
|
53
|
|
(Income) loss reclassified from AOCI
|
|
37
|
|
(a)
|
872
|
|
(b)
|
(1
|
)
|
(b)
|
(48
|
)
|
Net current period other comprehensive income (loss)
|
|
(905
|
)
|
|
911
|
|
|
34
|
|
|
5
|
|
Shares purchased from noncontrolling interests and other
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
Balance as of December 31, 2015
|
|
(2,252
|
)
|
|
(1,013
|
)
|
|
(3
|
)
|
|
(10
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(99
|
)
|
|
(115
|
)
|
|
(27
|
)
|
|
33
|
|
(Income) loss reclassified from AOCI
|
|
—
|
|
|
31
|
|
(b)
|
(1
|
)
|
(b)
|
(18
|
)
|
Net current period other comprehensive income (loss)
|
|
(99
|
)
|
|
(84
|
)
|
|
(28
|
)
|
|
15
|
|
Balance as of December 31, 2016
|
|
$
|
(2,351
|
)
|
|
$
|
(1,097
|
)
|
|
$
|
(31
|
)
|
|
$
|
5
|
|
|
|
(a)
|
Included in other (income) and expense, net as part of the charge related to the deconsolidation of our Venezuelan operations at December 31, 2015 (see
Note 1
).
|
|
|
(b)
|
Included in computation of net periodic pension and postretirement benefits costs (see
Note 9
).
|
Included in the defined benefit pension plans and other postretirement benefit plans balances as of
December 31, 2016
is
$1,162
and
$34
of unrecognized net actuarial loss and unrecognized net prior service credit, respectively, of which
$57
and
$9
pre-tax, respectively, are expected to be recognized as a component of net periodic benefit cost in
2017
.
|
|
|
|
|
47
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
The changes in the components of AOCI attributable to Kimberly-Clark, including the tax effect, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
Unrealized translation
|
$
|
(88
|
)
|
|
$
|
(882
|
)
|
|
$
|
(826
|
)
|
Tax effect
|
(11
|
)
|
|
(23
|
)
|
|
7
|
|
|
(99
|
)
|
|
(905
|
)
|
|
(819
|
)
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
Unrecognized net actuarial loss and transition amount
|
|
|
|
|
|
Funded status recognition
|
(230
|
)
|
|
(4
|
)
|
|
(624
|
)
|
Amortization included in net periodic benefit cost
|
52
|
|
|
75
|
|
|
100
|
|
2015 U.S. plan settlements (recorded in Other (income) and expense, net)
|
—
|
|
|
1,355
|
|
|
—
|
|
Currency and other
|
81
|
|
|
42
|
|
|
69
|
|
|
(97
|
)
|
|
1,468
|
|
|
(455
|
)
|
Unrecognized prior service cost/credit
|
|
|
|
|
|
Funded status recognition
|
(1
|
)
|
|
4
|
|
|
42
|
|
Amortization included in net periodic benefit cost
|
(8
|
)
|
|
(12
|
)
|
|
(7
|
)
|
Currency and other
|
(6
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(15
|
)
|
|
(10
|
)
|
|
32
|
|
Tax effect
|
28
|
|
|
(547
|
)
|
|
167
|
|
|
(84
|
)
|
|
911
|
|
|
(256
|
)
|
Other postretirement benefit plans
|
|
|
|
|
|
Unrecognized net actuarial loss and transition amount and other
|
(45
|
)
|
|
55
|
|
|
(36
|
)
|
Tax effect
|
17
|
|
|
(21
|
)
|
|
14
|
|
|
(28
|
)
|
|
34
|
|
|
(22
|
)
|
Cash flow hedges and other
|
|
|
|
|
|
Recognition of effective portion of hedges
|
44
|
|
|
66
|
|
|
18
|
|
Amortization included in net income
|
(20
|
)
|
|
(53
|
)
|
|
(5
|
)
|
Currency and other
|
(4
|
)
|
|
(7
|
)
|
|
2
|
|
Tax effect
|
(5
|
)
|
|
(1
|
)
|
|
3
|
|
|
15
|
|
|
5
|
|
|
18
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
(11
|
)
|
|
9
|
|
Change in AOCI
|
$
|
(196
|
)
|
|
$
|
34
|
|
|
$
|
(1,070
|
)
|
Amounts are reclassified from AOCI into cost of products sold, marketing, research and general expenses, interest expense or other (income) and expense, net, as applicable, in the consolidated income statement.
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 AOCI. For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in AOCI rather than net income. Upon sale or substantially complete liquidation of any of these subsidiaries, the applicable unrealized translation adjustment would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation. The change in unrealized translation in
2016
is primarily due to the weakening of most foreign currencies versus the U.S. dollar, including the British pound sterling, euro, and Korean won, partially offset by the strengthening of the Brazilian real. Also included in unrealized translation amounts are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.
|
|
|
|
|
48
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Note 11
. Leases and Commitments
We have entered into operating leases for certain warehouse facilities, automobiles and equipment. The future minimum obligations under operating leases having a noncancelable term in excess of one year are as follows:
|
|
|
|
|
|
Year Ending December 31
|
2017
|
$
|
187
|
|
2018
|
137
|
|
2019
|
94
|
|
2020
|
67
|
|
2021
|
39
|
|
Thereafter
|
73
|
|
Future minimum obligations
|
$
|
597
|
|
Consolidated rental expense under operating leases was
$271
,
$279
and
$303
in
2016
,
2015
and
2014
, respectively.
We have entered into long-term contracts for the purchase of superabsorbent materials, pulp and certain utilities. Commitments under these contracts based on current prices are
$681
in
2017
,
$184
in
2018
,
$187
in
2019
,
$197
in
2020
and
beyond the year 2020
are not significant.
Although we are primarily liable for payments on the above-mentioned leases and purchase commitments, our exposure to losses, if any, under these arrangements is not material.
Note 12
. Legal Matters
We are subject to various legal proceedings, claims and governmental inquiries, inspections, audits or investigations pertaining to issues such as contract disputes, product liability, tax matters, patents and trademarks, advertising, pricing, business practices, governmental regulations, employment and other matters. Although the results of litigation and claims cannot be predicted with certainty, we believe that the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity.
We are subject to federal, state and local environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. We have been named a potentially responsible party under the provisions of the U.S. federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statutes, at a number of sites where hazardous substances are present. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, liquidity, financial condition or results of operations.
Note 13
. 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 and those contracts are designated as cash flow hedges.
|
|
|
|
|
49
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
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.
Set forth below is a summary of the fair values of our derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Foreign currency exchange contracts
|
$
|
38
|
|
|
$
|
56
|
|
|
$
|
44
|
|
|
$
|
27
|
|
Commodity price contracts
|
5
|
|
|
—
|
|
|
2
|
|
|
15
|
|
Total
|
$
|
43
|
|
|
$
|
56
|
|
|
$
|
46
|
|
|
$
|
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 December 31, 2016 there were no outstanding interest rate contracts designated as fair value hedges.
Fair value hedges resulted in no significant ineffectiveness in each of the three years ended December 31, 2016
, and gains or losses recognized in interest expense were not significant. For each of the three years ended
December 31, 2016
,
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
December 31, 2016
, outstanding commodity forward contracts were in place to hedge a limited portion of our estimated requirements of the related underlying commodities in
2017
and future periods. As of
December 31, 2016
, the aggregate notional values of outstanding foreign exchange derivative contracts designated as cash flow hedges was
$740
and there were no outstanding interest rate derivative contracts designated as cash flow hedges.
Cash flow hedges resulted in no significant ineffectiveness in each of the three years ended December 31, 2016
, and
no
gains or losses were reclassified into earnings as a result of the discontinuance of cash flow hedges due to the original forecast transaction no longer being probable of occurring. At
December 31, 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
December 31, 2016
is
January 2019
.
Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in other (income) and expense, net. Losses of
$30
,
$188
and
$192
were recorded in the years ending
December 31, 2016
,
2015
and
2014
, 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
December 31, 2016
, the notional amount of these undesignated derivative instruments was
$1.9 billion
.
|
|
|
|
|
50
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Note 14
. Income Taxes
An analysis of the provision for income taxes follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
Current income taxes
|
|
|
|
|
|
United States
|
$
|
523
|
|
|
$
|
223
|
|
|
$
|
350
|
|
State
|
53
|
|
|
56
|
|
|
48
|
|
Other countries
|
361
|
|
|
394
|
|
|
387
|
|
Total
|
937
|
|
|
673
|
|
|
785
|
|
Deferred income taxes
|
|
|
|
|
|
United States
|
(40
|
)
|
|
(180
|
)
|
|
67
|
|
State
|
31
|
|
|
(74
|
)
|
|
(16
|
)
|
Other countries
|
(6
|
)
|
|
(1
|
)
|
|
20
|
|
Total
|
(15
|
)
|
|
(255
|
)
|
|
71
|
|
Total provision for income taxes
|
$
|
922
|
|
|
$
|
418
|
|
|
$
|
856
|
|
Income from continuing operations before income taxes is earned in the following tax jurisdictions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
United States
|
$
|
2,088
|
|
|
$
|
451
|
|
|
$
|
1,571
|
|
Other countries
|
921
|
|
|
884
|
|
|
684
|
|
Total income before income taxes
|
$
|
3,009
|
|
|
$
|
1,335
|
|
|
$
|
2,255
|
|
Deferred income tax assets and liabilities are composed of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2016
|
|
2015
|
Deferred tax assets
|
|
|
|
Pension and other postretirement benefits
|
$
|
499
|
|
|
$
|
682
|
|
Tax credits and loss carryforwards
|
450
|
|
|
443
|
|
Share based compensation
|
86
|
|
|
82
|
|
Other
|
512
|
|
|
517
|
|
|
1,547
|
|
|
1,724
|
|
Valuation allowances
|
(225
|
)
|
|
(274
|
)
|
Total deferred tax assets
|
1,322
|
|
|
1,450
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
Pension and other postretirement benefits
|
15
|
|
|
254
|
|
Property, plant and equipment, net
|
1,079
|
|
|
1,118
|
|
Investments in subsidiaries
|
190
|
|
|
186
|
|
Goodwill
|
83
|
|
|
64
|
|
Other
|
253
|
|
|
217
|
|
Total deferred tax liabilities
|
1,620
|
|
|
1,839
|
|
Net deferred tax assets (liabilities)
|
$
|
(298
|
)
|
|
$
|
(389
|
)
|
|
|
|
|
|
51
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Valuation allowances at the end of
2016
primarily relate to tax credits, capital loss carryforwards, and income tax loss carryforwards of
$0.7 billion
. If these items are not utilized against taxable income,
$473
of the income tax loss carryforwards will expire from
2017
through
2036
. The remaining
$251
have no expiration date.
Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to expiration of these carryforwards. Although realization is not assured, we believe it is more likely than not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased due to changes in the tax environment or if estimates of future taxable income change during the carryforward period.
Presented below is a reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the actual effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
U.S. statutory rate applied to income before income taxes
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Rate of state income taxes, net of federal tax benefit
|
1.8
|
|
|
(0.9
|
)
|
|
0.7
|
|
Statutory rates other than U.S. statutory rate
|
(2.7
|
)
|
|
(6.9
|
)
|
|
(3.0
|
)
|
Venezuela deconsolidation, balance sheet remeasurement and inflationary impacts
|
(0.1
|
)
|
|
4.5
|
|
|
4.9
|
|
Uncertain tax positions adjustment
(a)
|
—
|
|
|
3.7
|
|
|
—
|
|
Routine tax incentives
|
(4.0
|
)
|
|
(7.4
|
)
|
|
(3.6
|
)
|
Net tax cost on foreign income
|
0.1
|
|
|
5.1
|
|
|
3.6
|
|
Other - net
(b)
|
0.5
|
|
|
(1.8
|
)
|
|
0.4
|
|
Effective income tax rate
|
30.6
|
%
|
|
31.3
|
%
|
|
38.0
|
%
|
|
|
(a)
|
In 2015, we updated our assessment of uncertain tax positions for certain international operations and as a result we recorded an immaterial income tax charge of
$49
related to prior years.
|
|
|
(b)
|
Other - net is composed of numerous items, none of which is greater than 1.75 percent of income before income taxes.
|
At
December 31, 2016
, U.S. income taxes and foreign withholding taxes have not been provided on
$8.9 billion
of unremitted earnings of subsidiaries operating outside the U.S. These earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends, were lent to one of our U.S. entities, or if we were to sell our stock in the subsidiaries. Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable because of the complexities associated with this hypothetical calculation. We do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations in the foreseeable future.
Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Balance at January 1
|
$
|
406
|
|
|
$
|
416
|
|
|
$
|
473
|
|
Gross increases for tax positions of prior years
|
20
|
|
|
80
|
|
|
36
|
|
Gross decreases for tax positions of prior years
|
(104
|
)
|
|
(61
|
)
|
|
(91
|
)
|
Gross increases for tax positions of the current year
|
39
|
|
|
59
|
|
|
87
|
|
Settlements
|
(29
|
)
|
|
(63
|
)
|
|
(77
|
)
|
Other
|
(11
|
)
|
|
(25
|
)
|
|
(12
|
)
|
Balance at December 31
|
$
|
321
|
|
|
$
|
406
|
|
|
$
|
416
|
|
Of the amounts recorded as unrecognized tax benefits at
December 31, 2016
,
$251
would reduce our effective tax rate if recognized.
|
|
|
|
|
52
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During each of the three years ended
December 31, 2016
, the net impact in interest and penalties was not significant. Total accrued penalties and net accrued interest was
$47
and
$40
at
December 31, 2016
and
2015
, respectively.
It is reasonably possible that a number of uncertainties could be resolved within the next 12 months. The aggregate resolution of the uncertainties could be up to
$140
, while none of the uncertainties is individually significant. Resolution of these matters is not expected to have a material effect on our financial condition, results of operations or liquidity.
As of
December 31, 2016
, the following tax years remain subject to examination for the major jurisdictions where we conduct business:
|
|
|
Jurisdiction
|
Years
|
United States
|
2014 to 2016
|
United Kingdom
|
2012 to 2016
|
Brazil
|
2011 to 2016
|
Korea
|
2014 to 2016
|
China
|
2007 to 2016
|
Our U.S. federal income tax returns have been audited through
2013
. We have various federal income tax return positions in administrative appeals for
2004
,
2005
,
2007
and
2010
through
2013
.
State income tax returns are generally subject to examination for a period of
3 to 5 years
after filing of the respective return. The state effect of any changes to filed federal positions remains subject to examination by various states for a period of up to
two
years after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.
Note 15
. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing basic and diluted EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
|
|
|
|
|
|
|
|
|
|
|
(Millions of shares)
|
|
2016
|
|
2015
|
|
2014
|
Basic
|
|
359.4
|
|
|
363.8
|
|
|
374.5
|
|
Dilutive effect of stock options and restricted share unit awards
|
|
2.3
|
|
|
2.5
|
|
|
2.9
|
|
Diluted
|
|
361.7
|
|
|
366.3
|
|
|
377.4
|
|
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
December 31, 2016
,
2015
and
2014
was
356.6 million
,
360.9 million
and
365.3 million
, respectively.
Note 16
. 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 KCP. The reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes other (income) and expense, net and income and expense not associated with the business segments.
|
|
|
|
|
53
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
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.
|
Net sales to Wal-Mart Stores, Inc. were approximately
14 percent
in
2016
and
2015
, and
13 percent
in
2014
of our total net sales.
Information concerning consolidated operations by business segment is presented in the following tables:
Consolidated Operations by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
NET SALES
(a)
|
|
|
|
|
|
Personal Care
|
$
|
9,046
|
|
|
$
|
9,204
|
|
|
$
|
9,635
|
|
Consumer Tissue
|
5,967
|
|
|
6,121
|
|
|
6,645
|
|
K-C Professional
|
3,150
|
|
|
3,219
|
|
|
3,388
|
|
Corporate & Other
|
39
|
|
|
47
|
|
|
56
|
|
TOTAL NET SALES
|
$
|
18,202
|
|
|
$
|
18,591
|
|
|
$
|
19,724
|
|
|
|
|
|
|
|
OPERATING PROFIT
(b)
|
|
Personal Care
|
$
|
1,857
|
|
|
$
|
1,885
|
|
|
$
|
1,803
|
|
Consumer Tissue
|
1,117
|
|
|
1,073
|
|
|
1,062
|
|
K-C Professional
|
603
|
|
|
590
|
|
|
604
|
|
Corporate & Other
(c)
|
(252
|
)
|
|
(367
|
)
|
|
(495
|
)
|
Other (income) and expense, net
(d)
|
8
|
|
|
1,568
|
|
|
453
|
|
TOTAL OPERATING PROFIT
|
$
|
3,317
|
|
|
$
|
1,613
|
|
|
$
|
2,521
|
|
|
|
(a)
|
Net sales in the United States to third parties totaled
$8,874
,
$8,819
and
$8,573
in
2016
,
2015
and
2014
, respectively.
|
|
|
(b)
|
Segment operating profit excludes other (income) and expense, net and income and expenses not associated with the business segments.
|
|
|
(c)
|
Corporate & Other includes charges related to the
2014
Organization Restructuring of
$38
,
$63
and
$133
in 2016, 2015 and 2014, respectively, and
$5
and
$41
related to the remeasurement of the Venezuelan balance sheet in
2015
and
2014
, respectively. Corporate & Other also includes charges of
$23
for restructuring in Turkey in
2015
, and
$33
related to European strategic changes in
2014
.
|
|
|
(d)
|
Other (income) and expense, net for 2016 and 2015 includes income of
$11
and a charge of
$108
, respectively, related to the deconsolidation of our Venezuelan operations, and for
2015
and
2014
includes charges of
$40
and
$421
, respectively, related to the remeasurement of the Venezuelan balance sheet. In addition,
2015
includes
$1,358
for charges related to pension settlements, and
2014
includes a charge of
$35
related to a regulatory dispute in the Middle East.
|
|
|
|
|
|
54
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Care
|
|
Consumer
Tissue
|
|
K-C
Professional
|
|
Corporate
& Other
|
|
Ongoing
Operations
|
|
Health Care
Business
(Spun-off)
|
|
Consolidated
Total
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
$
|
305
|
|
|
$
|
280
|
|
|
$
|
116
|
|
|
$
|
4
|
|
|
$
|
705
|
|
|
$
|
—
|
|
|
$
|
705
|
|
2015
|
340
|
|
|
282
|
|
|
121
|
|
|
3
|
|
|
746
|
|
|
—
|
|
|
746
|
|
2014
|
359
|
|
|
299
|
|
|
132
|
|
|
3
|
|
|
793
|
|
|
69
|
|
|
862
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
6,141
|
|
|
4,761
|
|
|
2,151
|
|
|
1,549
|
|
|
14,602
|
|
|
—
|
|
|
14,602
|
|
2015
|
6,330
|
|
|
5,050
|
|
|
2,264
|
|
|
1,198
|
|
|
14,842
|
|
|
—
|
|
|
14,842
|
|
2014
|
6,373
|
|
|
5,229
|
|
|
2,339
|
|
|
1,585
|
|
|
15,526
|
|
|
—
|
|
|
15,526
|
|
Capital Spending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
421
|
|
|
250
|
|
|
95
|
|
|
5
|
|
|
771
|
|
|
—
|
|
|
771
|
|
2015
|
590
|
|
|
344
|
|
|
116
|
|
|
6
|
|
|
1,056
|
|
|
—
|
|
|
1,056
|
|
2014
|
501
|
|
|
314
|
|
|
143
|
|
|
6
|
|
|
964
|
|
|
75
|
|
|
1,039
|
|
Sales of Principal Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Billions of dollars)
|
|
2016
|
|
2015
|
|
2014
|
Consumer tissue products
|
|
$
|
6.0
|
|
|
$
|
6.1
|
|
|
$
|
6.6
|
|
Baby and child care products
|
|
6.4
|
|
|
6.6
|
|
|
7.0
|
|
Away-from-home professional products
|
|
3.1
|
|
|
3.2
|
|
|
3.4
|
|
All other
|
|
2.7
|
|
|
2.7
|
|
|
2.7
|
|
Consolidated
|
|
$
|
18.2
|
|
|
$
|
18.6
|
|
|
$
|
19.7
|
|
Note 17
. Supplemental Data
Supplemental Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2016
|
|
2015
|
|
2014
|
Advertising expense
|
$
|
665
|
|
|
$
|
710
|
|
|
$
|
767
|
|
Research expense
|
328
|
|
|
324
|
|
|
368
|
|
Equity Companies' Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
Gross
Profit
|
|
Operating
Profit
|
|
Net
Income
|
|
Corporation's
Share of Net
Income
|
2016
|
$
|
2,138
|
|
|
$
|
720
|
|
|
$
|
454
|
|
|
$
|
276
|
|
|
$
|
132
|
|
2015
|
2,255
|
|
|
773
|
|
|
497
|
|
|
308
|
|
|
149
|
|
2014
|
2,452
|
|
|
781
|
|
|
485
|
|
|
304
|
|
|
146
|
|
|
Current
Assets
|
|
Non-
Current
Assets
|
|
Current
Liabilities
|
|
Non-
Current
Liabilities
|
|
Stockholders'
Equity
|
2016
|
$
|
963
|
|
|
$
|
1,168
|
|
|
$
|
531
|
|
|
$
|
1,046
|
|
|
$
|
554
|
|
2015
|
1,103
|
|
|
993
|
|
|
508
|
|
|
1,068
|
|
|
520
|
|
2014
|
1,016
|
|
|
1,040
|
|
|
690
|
|
|
963
|
|
|
403
|
|
|
|
|
|
|
55
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
Equity companies are principally engaged in operations in the personal care and consumer tissue businesses. At
December 31, 2016
, our ownership interest in Kimberly-Clark de Mexico, S.A.B. de C.V. and subsidiaries was
47.9%
. Kimberly-Clark de Mexico, S.A.B. de C.V. is partially owned by the public, and its stock is publicly traded in Mexico. At
December 31, 2016
, our investment in this equity company was
$188
, and the estimated fair value of the investment was
$2.7 billion
based on the market price of publicly traded shares. Our other equity ownership interests are not significant to our consolidated balance sheet or financial results.
At
December 31, 2016
, unremitted net income of equity companies included in consolidated retained earnings was
$1.1 billion
.
Supplemental Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
December 31
|
Summary of Accounts Receivable, Net
|
2016
|
|
2015
|
From customers
|
$
|
2,077
|
|
|
$
|
2,017
|
|
Other
|
167
|
|
|
329
|
|
Less allowance for doubtful accounts and sales discounts
|
(68
|
)
|
|
(65
|
)
|
Total
|
$
|
2,176
|
|
|
$
|
2,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
2016
|
|
2015
|
Summary of Inventories by Major Class
|
LIFO
|
|
Non-
LIFO
|
|
Total
|
|
LIFO
|
|
Non-
LIFO
|
|
Total
|
Raw materials
|
$
|
93
|
|
|
$
|
236
|
|
|
$
|
329
|
|
|
$
|
100
|
|
|
$
|
297
|
|
|
$
|
397
|
|
Work in process
|
114
|
|
|
89
|
|
|
203
|
|
|
110
|
|
|
93
|
|
|
203
|
|
Finished goods
|
430
|
|
|
600
|
|
|
1,030
|
|
|
525
|
|
|
689
|
|
|
1,214
|
|
Supplies and other
|
—
|
|
|
280
|
|
|
280
|
|
|
—
|
|
|
278
|
|
|
278
|
|
|
637
|
|
|
1,205
|
|
|
1,842
|
|
|
735
|
|
|
1,357
|
|
|
2,092
|
|
Excess of FIFO or weighted-average cost over LIFO cost
|
(163
|
)
|
|
—
|
|
|
(163
|
)
|
|
(183
|
)
|
|
—
|
|
|
(183
|
)
|
Total
|
$
|
474
|
|
|
$
|
1,205
|
|
|
$
|
1,679
|
|
|
$
|
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.
|
|
|
|
|
|
|
|
|
|
December 31
|
Summary of Property, Plant and Equipment, Net
|
2016
|
|
2015
|
Land
|
$
|
163
|
|
|
$
|
164
|
|
Buildings
|
2,612
|
|
|
2,537
|
|
Machinery and equipment
|
13,591
|
|
|
13,393
|
|
Construction in progress
|
488
|
|
|
453
|
|
|
16,854
|
|
|
16,547
|
|
Less accumulated depreciation
|
(9,685
|
)
|
|
(9,443
|
)
|
Total
|
$
|
7,169
|
|
|
$
|
7,104
|
|
Property, plant and equipment, net in the United States as of
December 31, 2016
and
2015
was
$3,638
and
$3,716
, respectively.
|
|
|
|
|
56
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|
|
|
|
|
|
|
|
|
|
|
December 31
|
Summary of Accrued Expenses
|
2016
|
|
2015
|
Accrued advertising and promotion
|
$
|
373
|
|
|
$
|
339
|
|
Accrued salaries and wages
|
426
|
|
|
392
|
|
Accrued rebates
|
220
|
|
|
229
|
|
Accrued taxes - income and other
|
259
|
|
|
329
|
|
Accrued interest
|
96
|
|
|
82
|
|
Derivatives
|
44
|
|
|
36
|
|
Other
|
357
|
|
|
343
|
|
Total
|
$
|
1,775
|
|
|
$
|
1,750
|
|
Supplemental Cash Flow Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Cash Flow Effects of Decrease (Increase) in Operating Working Capital
|
Year Ended December 31
|
2016
|
|
2015
|
|
2014
|
Accounts receivable
|
$
|
(23
|
)
|
|
$
|
60
|
|
|
$
|
267
|
|
Inventories
|
230
|
|
|
(28
|
)
|
|
12
|
|
Trade accounts payable
|
(61
|
)
|
|
44
|
|
|
(30
|
)
|
Accrued expenses
|
26
|
|
|
(110
|
)
|
|
(120
|
)
|
Accrued income taxes
|
121
|
|
|
(81
|
)
|
|
(159
|
)
|
Derivatives
|
43
|
|
|
(63
|
)
|
|
103
|
|
Currency and other
|
(2
|
)
|
|
(267
|
)
|
|
(249
|
)
|
Total
|
$
|
334
|
|
|
$
|
(445
|
)
|
|
$
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
Other Cash Flow Data
|
2016
|
|
2015
|
|
2014
|
Interest paid
|
$
|
315
|
|
|
$
|
308
|
|
|
$
|
300
|
|
Income taxes paid
|
744
|
|
|
695
|
|
|
926
|
|
|
|
|
|
|
57
|
KIMBERLY-CLARK CORPORATION
- 2016 Annual Report
|