Kimberly-Clark Corporation
12/04/2025 | Press release | Distributed by Public on 12/04/2025 05:07
EXPLANATORY NOTE (Form 8-K)
EXPLANATORY NOTE
This Exhibit 99.1 includes the following revised portions of the 2024 Annual Report on Form 10-K originally filed with the Securities and Exchange Commission ("SEC") on February 13, 2025 ("2024 Form 10-K") of Kimberly-Clark Corporation (the "Corporation," "Company," "we" or "our") for all periods presented to reflect the presentation of our International Family Care and Professional ("IFP") Business as discontinued operations:
•Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
•Part II, Item 8. Financial Statements and Supplementary Data
•Part IV, Item 15. Exhibits, Financial Statements Schedules
Except as specifically set forth herein to reflect the IFP Business as discontinued operations, no revisions have been made to our 2024 Form 10-K to update for other information, developments or events that have occurred since such filing. This Exhibit 99.1 should be read in conjunction with our 2024 Form 10-K and subsequent filings with the SEC, including Quarterly Reports on Form 10-Q for the periods ended March 31, 2025, June 30, 2025, and September 30, 2025 and Current Reports on Form 8-K. These subsequent SEC filings contain important information regarding events, risks, developments and updates affecting the Corporation and our expectations that have occurred since the filing of our 2024 Form 10-K. The information contained herein is not an amendment to, or a restatement of our 2024 Form 10-K. Unaffected items and unaffected portions of our 2024 Form 10-K have not been repeated in, and are not amended or modified by this Exhibit 99.1. Amounts included in this Exhibit 99.1 are reported in millions unless otherwise noted.
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KIMBERLY-CLARK CORPORATION
TABLE OF CONTENTS
| PART II | Page | |||||||
| PART IV | ||||||||
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| PART II | |||||
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
This MD&A is intended to provide investors with an understanding of our recent performance, financial condition, cash flows and future prospects. This discussion and analysis compares consolidated and segment results for 2024 to 2023 and 2023 to 2022. As discussed in Item 8, Notes 1 and 3 to the Consolidated Financial Statements, the results and related assets and liabilities of the IFP Business are reported as discontinued operations. As a result, unless specifically stated, all discussions included below reflect continuing operations for all periods presented. The reference to "N.M." indicates that the calculation is not meaningful. Amounts are reported in millions, except per share amounts, unless otherwise noted.
The following will be discussed and analyzed:
•Overview of Business and Recent Developments
•Business Environment and Trends
•Results of Operations
•Liquidity and Capital Resources
Throughout this MD&A, we refer to financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the financial measures used to evaluate management. For additional information and reconciliations to the most closely comparable financial measures presented in our Consolidated Financial Statements, which are calculated in accordance with U.S. GAAP, see "Summary of Non-GAAP Financial Measures" below.
Overview of Business and Recent Developments
We are a global company focused on delivering essential products and solutions that solve unmet consumer needs and provide Better Care for a Better World. We have manufacturing facilities in 30 countries, including our equity affiliates, and products sold in more than 175 countries and territories. Our products are sold under well-known, trusted brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend.
In operating our business, we seek to:
•grow our portfolio of brands through consumer-centric and science-based innovation, category development and commercial execution;
•leverage our cost and financial discipline to fund durable growth and improve margins; and
•allocate capital in value-creating ways.
To achieve these objectives, we will continue executing our Powering Care strategy and its three synergistic, strategic pillars: accelerate pioneering innovation, optimize our margin structure, and wire our organization for growth. Our first pillar focuses on investing in our brands to enhance our competitive advantage by leveraging our best-in-class science and proprietary, category-shaping technologies to deliver innovative product solutions that solve unmet consumer needs around the world. It also includes an emphasis on delivering breakthrough storytelling that grows category participation and brand love. Our second pillar is driven by our supply chain transformation and investment in three key areas that will enhance our value chain and improve our margin structure: value stream simplification, network optimization, and scalable automation. Our third pillar is centered on making our enterprise stronger and faster while sharpening our portfolio focus and footprint on categories and markets with the greatest long-term potential.
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Our strong legacy of financial discipline supports our Powering Care strategy through consistent investment in our technologies and brands, sustained supply chain productivity and enhanced working capital efficiency. Our capital allocation approach prioritizes capital investments to drive durable growth in our business, a strong and growing dividend, value accretive acquisitions that can enhance our portfolio, and allocation of excess cash flow to share repurchases.
We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" of the 2024 Form 10-K for additional information.
Changes to Reportable Segments
As part of the realignment of our internal operating and management structure, during the fourth quarter of 2024, we began to manage and report our operations through three reportable segments defined by geographic regions and product groupings: North America ("NA"), International Personal Care ("IPC") and International Family Care and Professional ("IFP"). Further, our measure of segment profitability was changed to include the effects of changes in exchange rates on monetary assets and liabilities for subsidiaries where we have adopted highly inflationary accounting. Subsequently during 2025, our segment reporting was impacted by the IFP Transaction, discussed further below.
IFP Transaction
On June 5, 2025, we announced that the Company will form a joint venture with Suzano S.A. ("Suzano") and Suzano International Holding B.V., a wholly-owned subsidiary of Suzano ("Buyer"), comprised of substantially all the operations of the Company's former IFP segment (the "IFP Business"). To facilitate this transaction, we entered into an Equity and Asset Purchase Agreement (the "Purchase Agreement") with Buyer, pursuant to which we will, among other things, effectuate a reorganization through the transfer of certain assets, liabilities and equity interests of the IFP Business to Kimberly-Clark IFP NewCo B.V., an indirect wholly-owned subsidiary of the Company (the "Joint Venture"). At the time of closing, which is expected to take place in mid-2026 and will only take place following the satisfaction of consultation requirements and customary closing conditions, including obtaining required regulatory approvals, Buyer will acquire a 51% interest in the Joint Venture for a purchase price of approximately $1.7 billion, subject to certain closing adjustments set forth in the Purchase Agreement, and we will retain a 49% equity interest (the "IFP Transaction"). As a result, the results of operations and applicable assets and liabilities of the IFP Business are reported as discontinued operations in the Company's Consolidated Financial Statements for all periods presented. See Item 8, Notes 1 and 3 to the Consolidated Financial Statements for further details.
The Company's continuing operations are now organized into two reportable segments defined by geographic region: North America and International Personal Care. The results of the IFP Business, including certain costs that were previously allocated to the IPC segment that relate to assets or activities that are part of the IFP Transaction, are reported as discontinued operations and excluded from segment results for all periods presented. Additionally, certain operations and commercial activities of the former IFP segment retained by the Company are now reported in the NA and IPC segments. Further, Corporate and Other was updated for all periods presented to include the following:
•Operations of the former IFP segment that were divested prior to the IFP Transaction and therefore not reported as discontinued operations.
•Costs previously allocated to the former IFP segment that are not directly attributable to the operations included in the IFP Transaction and therefore are not reported as discontinued operations.
Segment results for the historical periods presented have been recast to reflect these changes. Segments are described in greater detail in Item 8, Note 16 to the Consolidated Financial Statements.
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2024 Transformation Initiative
The 2024 Transformation Initiative is designed to sharpen our strategic focus through a new operating model and strategy that leverages three synergistic pillars:
•Accelerating pioneering innovation to capture significant growth available in our product categories by investing in science-based and proprietary technology to solve unmet and evolving consumer needs, and delivering breakthrough storytelling to drive category participation and brand love;
•Optimizing our margin structure to deliver superior consumer propositions at every rung of the good, better, best ladder, and implement initiatives and deploy technology and data analytics designed to create a fast, adaptable, integrated supply chain with greater visibility that can deliver continuous improvement; and
•Wiring our organization for growth to drive agility, speed, and focused execution that extends our competitive advantages further into the future.
Our new operating model and Powering Care strategy is intended to drive durable, long-term growth. Specifically, we are harnessing our inherent strengths, powerhouse brands and categories, science as our competitive advantage, and scalable capabilities led by top talent to sharpen our focus on growth. As we execute our strategy, we will reduce our structural cost base by realigning our internal operating and management structure to streamline our global supply chain and improve the efficiency of our corporate and regional overhead cost structures. The transformation is expected to impact our organization in all major geographies, and workforce reductions are expected to be in the range of 4% to 5%. Certain actions under the 2024 Transformation Initiative are being finalized for implementation, and accounting for such actions will commence when the actions are authorized for execution. The 2024 Transformation Initiative is expected to be completed by the end of 2026. Total pre-tax savings are expected to be $3.0 billion in gross productivity; inclusive of input cost and manufacturing cost savings, and $200 in selling, general and administrative expenses. Total costs are anticipated to be approximately $1.5 billion pre-tax. Cash costs are expected to be approximately half of that amount, primarily related to workforce reductions and other program costs. Expected non-cash charges are primarily related to incremental depreciation and asset write-offs, including losses associated with the expected exit of certain markets. For the year ended December 31, 2024, total 2024 Transformation Initiative charges were $457 pre-tax ($339 after-tax).
Acquisition and Divestiture Activity
On July 1, 2024, we completed the sale transaction that was announced on April 7, 2024, of our personal protective equipment ("PPE") business for total consideration of $635, including the initial purchase price of $640 less working capital and other closing adjustments of $5. The transaction included Kimtech branded products, such as gloves, apparel and masks, and KleenGuard branded products, such as gloves, apparel, respirators and eyewear, which serve a variety of scientific and industrial industries globally. Upon closure of the transaction, a pre-tax gain of $566 ($453 after-tax) was recognized in Other (income) and expense, net. This gain is net of transaction costs of $14 that were determined to be directly attributable to the sale transaction.
On February 24, 2022, we completed our acquisition of a majority and controlling share of Thinx Inc. ("Thinx"), an industry leader in the reusable period and incontinence underwear category, for total consideration of $181. Subsequently in 2023, we acquired the remaining outstanding ownership interests in Thinx for additional purchase consideration of $95. As the purchase of additional ownership in an already controlled subsidiary represents an equity transaction, no gain or loss was recognized in consolidated net income or comprehensive income. See Item 8, Note 4 to the Consolidated Financial Statements for additional details.
On June 1, 2023, we completed the sale transaction of our Neve tissue brand and related consumer and professional tissue assets in Brazil for $212. Upon closure of the transaction, a gain of $74 pre-tax was recognized in Other (income) and expense, net. We incurred divestiture-related costs of $30 pre-tax which were recorded in Cost of products sold and Marketing, research and general expenses, resulting in a net benefit of $44 pre-tax ($26 after-tax). See Item 8, Note 4 to the Consolidated Financial Statements for additional details.
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Business Environment and Trends
Our results of operations have been, and we expect them to continue to be, affected by the following factors and key trends, which may cause our future results of operations to differ from our historical results discussed under "Results of Operations."
Birth Rate Trends- Sales of our baby and child care products are highly correlated with birth rate trends. In recent years, birth rate declines in key countries, including China, South Korea and the U.S., have pressured category volume growth rates. To help mitigate the effects of birth rate declines, we aim to drive sales growth at or ahead of category growth rates through innovation, premiumization, strong brand building plans and digital marketing investment as part of our growth strategy.
Competition- Our products are sold in a highly competitive global marketplace. Our competitors include global, regional and local manufacturers, including private label manufacturers which offer products that are typically sold at lower prices. In particular, private label market share has been increasing in the tissue category. Increased purchases of private label products could reduce net sales of our higher-margin products which would negatively impact our profitability. While the global marketplace in which we operate has always been highly competitive, we continue to experience increased concentration and the growing presence of large-format retailers, discounters and e-tailers. This market environment has resulted in increased pressure on pricing and other competitive factors, and we expect these pressures to continue in the coming year.
Pricing- Our net sales growth and profitability may be affected as we adjust prices to address market conditions. We adjust our product prices based on a number of variables including demand, the competitive environment, technological improvements, product innovations and changes in our raw material, distribution, energy and other input costs. Price changes may affect net sales, earnings and market share in the near term as the market adjusts to new pricing and other market conditions.
Operating Costs- Our operating costs include raw materials, labor, selling, general and administrative expenses, general business taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, and pricing actions. To remain competitive on our operating structure, we continue to work on programs to expand our profitability, including our 2024 Transformation Initiative. While we saw stabilization in input costs in 2024 with tailwinds in fiber, resin and energy, the overall cost basket remains elevated versus pre-pandemic levels. In 2025, we expect net input costs to be inflationary, including the impact from currency on our non-U.S. operations.
Evolving Consumer Product and Shopping Preferences- The retail landscape in many of our markets continues to evolve due to the rapid growth of e-commerce retailers, changing consumer preferences (as consumers increasingly shop online) and the increased presence of alternative retail channels, such as subscription services and direct-to-consumer businesses. Changing consumer preferences also include increased concerns in regard to post-consumer waste and packaging materials and their impact on environmental sustainability. If we experience lower sales due to changes in consumer demand for our products, our earnings could decrease. We believe our Powering Care strategy, sharpened growth focus, sustainability initiatives, innovation pipeline and continued investment in e-commerce capabilities - underpinned by our commitment to delivering Better Care for a Better World - make us well positioned relative to these changing external dynamics.
Volatility of Global Markets- Our growth strategy depends in part on our ability to expand our international operations, including in emerging markets. Some of these markets have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions. Volatility in these markets affects our production costs and the demand for our products and may impact our supply chain and distribution networks. Volatility in global consumer demand, commodity costs and foreign currency exchange rates increased significantly over the past few years and is expected to continue in the near term.
Climate Change- We operate in many regions around the world where our businesses could be disrupted by climate change. Our climate change risk categories include risks related to the transition to a lower-carbon economy ("Transition Risks") and risks related to the physical impacts of climate change ("Physical Risks"). Transition Risks include increased costs of carbon emission, increased cost to produce products in compliance with future
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regulations, increased raw materials cost, shifts in customer/consumer values and other legal, regulatory and technological risks. Physical Risks include the risk of direct damage to assets or supply chain disruption caused by severe weather events such as floods, storms, wildfires and droughts. We continue to progress toward our 2030 Sustainability Goals which include elements that aim for reductions in greenhouse gas emissions, use of natural forest fibers, use of plastics and use of water in water-stressed regions.
War in Ukraine- Consistent with the humanitarian nature of our products, we manufacture and sell only essential items in Russia, such as baby diapers and feminine pads, which are critical to the health and hygiene of women, girls and babies. Beginning in March 2022, we significantly adjusted our business in Russia, substantially curtailing media, advertising and promotional activity and suspending capital investments, other than certain maintenance investments, in our sole manufacturing facility in Russia. Our Russia business has represented approximately 1% to 2% of our net global sales, operating profit and total assets. Our ability to continue our operations in Russia may change as the situation evolves. We have experienced high input costs, supply chain complexities, reduced consumer demand, restricted access to raw materials and production assets, and restricted access to financial institutions, as well as supply chain, professional services, monetary, currency, trade and payment/investment sanctions and related controls. As the business, geopolitical and regulatory environment concerning Russia evolves, we may not be able to sustain the limited manufacture and sale of our products, and our assets may be partially or fully impaired.
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Results of Operations
Consolidated Results
The following discussion and analysis compares our consolidated results of operations and other information for 2024 to 2023 and 2023 to 2022. Prior periods have been recast to reflect the reporting of the IFP Business as discontinued operations as discussed above.
Summary of Results
| Year Ended December 31 | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 |
Change 2024 vs. 2023 |
Change 2023 vs. 2022 |
||||||||||||||||||||||||||||
| Net Sales | $ | 16,805 | $ | 17,146 | $ | 16,952 | (2.0) | % | 1.1 | % | ||||||||||||||||||||||
| Gross Profit | 6,289 | 6,269 | 5,524 | 0.3 | % | 13.5 | % | |||||||||||||||||||||||||
| Operating Profit | 2,700 | 1,928 | 2,309 | 40.0 | % | (16.5) | % | |||||||||||||||||||||||||
| Provision for income taxes | (442) | (343) | (405) | 28.9 | % | (15.3) | % | |||||||||||||||||||||||||
| Income from Continuing Operations | 2,192 | 1,459 | 1,679 | 50.2 | % | (13.1) | % | |||||||||||||||||||||||||
| Income from Discontinued Operations, Net of Income Taxes | 386 | 305 | 282 | 26.6 | % | 8.2 | % | |||||||||||||||||||||||||
| Net Income Attributable to Kimberly-Clark Corporation | 2,545 | 1,764 | 1,934 | 44.3 | % | (8.8) | % | |||||||||||||||||||||||||
| Diluted Earnings per Share from Continuing Operations | 6.41 | 4.31 | 4.89 | 48.7 | % | (11.9) | % | |||||||||||||||||||||||||
| Diluted Earnings per Share from Discontinued Operations | 1.14 | 0.90 | 0.83 | 26.7 | % | 8.4 | % | |||||||||||||||||||||||||
Adjusted Results - Continuing Operations
| Year Ended December 31 | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 |
Change 2024 vs. 2023 |
Change 2023 vs. 2022 |
||||||||||||||||||||||||||||
|
Adjusted Gross Profit(a)
|
$ | 6,433 | $ | 6,284 | $ | 5,524 | 2.4 | % | 13.8 | % | ||||||||||||||||||||||
|
Adjusted Operating Profit(a)
|
2,727 | 2,542 | 2,245 | 7.3 | % | 13.2 | % | |||||||||||||||||||||||||
|
Adjusted Earnings per Share(a)
|
6.16 | 5.67 | 4.81 | 8.6 | % | 17.9 | % | |||||||||||||||||||||||||
|
Adjusted Effective Tax Rate(a)
|
22.7 | % | 22.6 | % | 21.6 | % | 0.1 | % | 1.0 | % | ||||||||||||||||||||||
(a) Adjusted amounts are Non-GAAP financial measures. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to Non-GAAP measures.
2024 versus 2023
Net Sales:
Drivers of the changes in net sales were:
| Percent Change in Net Sales | Volume | Mix/Other | Net Price |
Divestitures and Business Exits(c)
|
Currency Translation |
Total(a)
|
Organic(b)
|
|||||||||||||||||||||||||||||||||||||
| 2024 versus 2023 | 0.6 | 0.4 | 2.7 | (1.6) | (4.2) | (2.0) | 3.9 | |||||||||||||||||||||||||||||||||||||
(a) Total may not sum across due to rounding.
(b) Represents the change in net sales excluding the impacts of currency translation and divestitures and business exits. Organic Sales Growth is a non-GAAP financial measure. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to non-GAAP measures.
(c) Impact of the sale of the Brazil tissue and professional business, sale of the PPE business and other exited businesses and markets in conjunction with the 2024 Transformation Initiative.
Net sales of $16.8 billion for the year ended December 31, 2024 declined 2.0% primarily due to unfavorable currency impacts and divestitures and business exits, partially offset by organic sales growth. Organic sales
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increased 3.9% driven by a 2.7% increase in price, primarily in hyperinflationary economies, coupled with gains in volume and mix.
Gross and Operating Profits
Gross profit of $6.3 billion for the year ended December 31, 2024 was flat to the prior year, while gross margin of 37.4% increased approximately 80 basis points. Gross margin in 2024 included approximately 90 basis points for charges related to the 2024 Transformation Initiative. Excluding these charges, adjusted gross margin increased approximately 170 basis points to 38.3% primarily due to gross productivity savings from integrated margin management of approximately $410, favorable pricing net of inflation and volume gains, partially offset by higher manufacturing costs.
Operating profit of $2.7 billion for the year ended December 31, 2024 increased 40.0%. Results in 2024 included a $565 gain from the sale of our PPE business, offset by charges of $456 related to the 2024 Transformation Initiative and $136 from the impairment of intangible assets and litigation and regulatory matters associated with a previously exited business. Results in 2023 included $658 of charges from the impairment of intangible assets and a $44 net benefit related to the sale of our Brazil tissue and professional business. Excluding these items, adjusted operating profit was $2.7 billion in 2024 and $2.5 billion in 2023.
Drivers of the changes in adjusted operating profit were:
|
Percent Change in Adjusted Operating Profit |
Volume | Net Price | Input Costs |
Other Manufacturing Costs(a)
|
Currency Translation |
Other(b)
|
Total(c)
|
|||||||||||||||||||||||||||||||||||||
| 2024 versus 2023 | 2.2 | 18.5 | (8.3) | 4.7 | (7.0) | (2.8) | 7.3 | |||||||||||||||||||||||||||||||||||||
(a) Includes net impact of productivity initiatives, product and supply chain investments and other changes in cost of products sold.
(b) Includes impact of changes in product mix, marketing, research and general expenses and other (income) and expense, net.
(c) Adjusted Operating Profit is a non-GAAP financial measure. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to non-GAAP measures.
Adjusted operating results benefited from higher adjusted gross profit discussed above, partially offset by unfavorable currency impacts, primarily due to hyperinflationary economies, and higher marketing, research and general expenses.
Income from Continuing Operations
Income from Continuing Operations of $2.2 billion for the year ended December 31, 2024 increased 50.2% primarily due to the increase in operating profit discussed above. Net interest expense of $222 was largely in line with the prior year period. Our share of net income of equity companies was $216, an increase of 10.2% primarily driven by Kimberly-Clark de Mexico, S.A.B. de C.V., which benefited from volume, mix and pricing growth and productivity savings, partially offset by unfavorable currency impacts and higher marketing, research and general expenses. The effective tax rate was 18.3% in 2024 compared to 21.4% in 2023, with the decline primarily due to the net benefit of items not reflective of our underlying operations discussed in the section above. Excluding these benefits, the adjusted effective tax rate was 22.7% in 2024 compared to 22.6% in 2023.
Diluted earnings per share of $6.41 for the year ended December 31, 2024 increased 48.7% reflective of the growth in income discussed above. Adjusted earnings per share of $6.16 increased 8.6% primarily driven by higher adjusted operating profit.
Income from Discontinued Operations, Net of Income Taxes
Income from discontinued operations, net of income taxes of $386 for the year ended December 31, 2024 increased 26.6% primarily due to gross productivity savings, partially offset by unfavorable pricing net of inflation and higher research, selling and general expenses.
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2023 versus 2022
Net Sales:
Drivers of the changes in net sales were:
| Percent Change in Net Sales | Volume | Mix/Other | Net Price |
Divestitures and Business Exits(c)
|
Currency Translation |
Total(a)
|
Organic(b)
|
|||||||||||||||||||||||||||||||||||||
| 2023 versus 2022 | (1.3) | 0.6 | 5.5 | (0.7) | (3.0) | 1.1 | 4.8 | |||||||||||||||||||||||||||||||||||||
(a) Total may not sum across due to rounding.
(b) Represents the change in net sales excluding the impacts of currency translation and divestitures and business exits. Organic Sales Growth is a non-GAAP financial measure. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to non-GAAP measures.
(c) Impact of the sale of the Brazil tissue and professional business.
Net sales of $17.1 billion for the year ended December 31, 2023 increased 1.1% primarily due to organic sales growth, partially offset by unfavorable currency impacts and divestitures and business exits. Organic sales increased 4.8% primarily from a 5.5% increase in net pricing, partially offset by lower volumes.
Gross and Operating Profits
Gross profit of $6.3 billion for the year ended December 31, 2023 increased 13.5%, while gross margin of 36.6% increased 400 basis points primarily due to favorable pricing net of inflation and gross productivity savings from integrated margin management of approximately $440, partially offset by higher manufacturing costs.
Operating profit of $1.9 billion for the year ended December 31, 2023 decreased 16.5%. Results in 2023 included $658 of charges from the impairment of intangible assets and a $44 net benefit related to the sale of our Brazil tissue and professional business. Results in 2022 included a $64 net benefit related to the acquisition of a controlling interest in Thinx. Excluding these items, adjusted operating profit was $2.5 billion in 2023 and $2.2 billion in 2022.
Drivers of the changes in adjusted operating profit were:
|
Percent Change in Adjusted Operating Profit |
Volume | Net Price | Input Costs |
Other Manufacturing Costs(a)
|
Currency Translation |
Other(b)
|
Total(c)
|
|||||||||||||||||||||||||||||||||||||
| 2023 versus 2022 | (3.3) | 41.5 | (5.5) | 5.5 | (5.3) | (19.7) | 13.2 | |||||||||||||||||||||||||||||||||||||
(a) Includes net impact of productivity initiatives, product and supply chain investments and other changes in cost of products sold.
(b) Includes impact of changes in product mix, marketing, research and general expenses and other (income) and expense, net.
(c) Adjusted Operating Profit is a non-GAAP financial measure. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to non-GAAP measures.
Adjusted operating results benefited from higher gross profit discussed above, partially offset by unfavorable currency impacts, primarily due to hyperinflationary economies, and higher marketing, research and general expenses.
Income from Continuing Operations
Income from Continuing Operations of $1.5 billion for the year ended December 31, 2023 decreased 13.1% primarily due to the decrease in operating profit discussed above. Our share of net income of equity companies was $196, an increase of 69.0% primarily driven by Kimberly-Clark de Mexico, S.A.B. de C.V., which benefited from favorable currency impacts, pricing growth and gross productivity savings, partially offset by higher manufacturing costs and marketing, research and general expenses. The effective tax rate was 21.4% in 2023 compared to 20.6% in 2022, while the adjusted effective tax rates for the same periods were 22.6% and 21.6%, respectively.
Diluted earnings per share of $4.31 for the year ended December 31, 2023 decreased 11.9% reflective of the decline in Income from Continuing Operations discussed above. Adjusted earnings per share of $5.67 increased 17.9% primarily driven by higher adjusted operating profit and improved net income from our equity companies.
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Income from Discontinued Operations, Net of Income Taxes
Income from discontinued operations, net of income taxes of $305 for the year ended December 31, 2023 increased 8.2% primarily due to favorable pricing net of inflation, partially offset by higher manufacturing costs and lower volumes.
Segment Results
The following presents the results of the Company's reportable segments and compares our segment net sales, operating profit and other information for 2024 to 2023 and 2023 to 2022.
Drivers of the changes in segment net sales and operating profit were:
| Percent Change in Segment Net Sales | Volume | Mix/Other | Net Price |
Divestitures and Business Exits(c)
|
Currency Translation |
Total(a)
|
Organic(b)
|
|||||||||||||||||||||||||||||||||||||
| 2024 versus 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| NA | 0.5 | 0.5 | 0.1 | (0.8) | (0.1) | 0.2 | 1.1 | |||||||||||||||||||||||||||||||||||||
| IPC | 0.9 | 0.4 | 7.7 | (0.2) | (12.1) | (3.3) | 9.0 | |||||||||||||||||||||||||||||||||||||
| 2023 versus 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| NA | 0.3 | 0.4 | 4.3 | 0.2 | (0.3) | 5.0 | 5.0 | |||||||||||||||||||||||||||||||||||||
| IPC | (4.1) | 1.3 | 7.8 | - | (7.8) | (2.8) | 5.0 | |||||||||||||||||||||||||||||||||||||
|
Percent Change in Segment Operating Profit |
Volume | Net Price | Input Costs |
Other Manufacturing Costs(d)
|
Currency Translation |
Other(e)
|
Total | |||||||||||||||||||||||||||||||||||||
| 2024 versus 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| NA | 0.9 | 0.4 | - | 1.8 | (0.1) | (1.9) | 1.1 | |||||||||||||||||||||||||||||||||||||
| IPC | 3.3 | 68.3 | (31.2) | 8.3 | (26.0) | - | 22.7 | |||||||||||||||||||||||||||||||||||||
| 2023 versus 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| NA | (0.6) | 21.4 | 5.5 | 5.5 | (0.3) | (12.7) | 18.8 | |||||||||||||||||||||||||||||||||||||
| IPC | (6.9) | 67.5 | (33.9) | 4.2 | (15.9) | (19.9) | (4.9) | |||||||||||||||||||||||||||||||||||||
(a) Total may not sum across due to rounding.
(b) Represents the change in net sales excluding the impacts of currency translation and divestitures and business exits. Organic Sales Growth is a non-GAAP financial measure. See "Summary of Non-GAAP Financial Measures" below for reconciliations of our GAAP to non-GAAP measures.
(c) Impact of the sale of the PPE business and other exited businesses and markets in conjunction with the 2024 Transformation Initiative.
(d) Includes net impact of productivity initiatives, product and supply chain investments and other changes in cost of products sold.
(e) Includes impact of changes in product mix, marketing, research and general expenses and other (income) and expense, net.
North America
| Year Ended December 31 | % change | % change | ||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 vs. 2023 | 2023 vs. 2022 | ||||||||||||||||||||||||||||
| Net Sales | $ | 11,017 | $ | 10,996 | $ | 10,476 | 0.2 | % | 5.0 | % | ||||||||||||||||||||||
| Operating Profit | 2,542 | 2,514 | 2,116 | 1.1 | % | 18.8 | % | |||||||||||||||||||||||||
2024 versus 2023
Net sales of $11.0 billion were flat as an increase in organic sales of 1.1% was largely offset by divestitures and business exits. Organic sales benefited from volume and mix gains, led by Baby & Child Care and Adult Care.
Operating profit of $2.5 billion increased 1.1% primarily due to gross productivity savings and volume growth, partially offset by incremental manufacturing costs and higher advertising and promotion expenses.
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2023 versus 2022
Net sales of $11.0 billion increased 5.0% primarily due to higher net selling prices across the entire product portfolio, led by Professional and Family Care.
Operating profit of $2.5 billion increased 18.8% primarily due to favorable pricing net of inflation and gross productivity savings, partially offset by higher marketing, research and general expenses.
International Personal Care
| Year Ended December 31 | % change | % change | ||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 vs. 2023 | 2023 vs. 2022 | ||||||||||||||||||||||||||||
| Net Sales | $ | 5,743 | $ | 5,940 | $ | 6,109 | (3.3) | % | (2.8) | % | ||||||||||||||||||||||
| Operating Profit | 826 | 673 | 708 | 22.7 | % | (4.9) | % | |||||||||||||||||||||||||
2024 versus 2023
Net sales of $5.7 billion decreased 3.3% as unfavorable currency impacts of 12.1% were partially offset by a 9.0% increase in organic sales. Organic sales benefited from higher net selling prices of 7.7%, primarily from hyperinflationary economies, and volume growth of 0.9%, led by China.
Operating profit of $826 increased 22.7% primarily due to favorable pricing net of inflation and gross productivity savings, partially offset by unfavorable currency impacts and higher manufacturing costs. Pricing and unfavorable currency impacts were primarily driven by hyperinflationary economies. Other operating costs, namely incremental advertising investments, were largely offset by lower monetary losses from changes in exchange rates in highly inflationary economies.
2023 versus 2022
Net Sales of $5.9 billion decreased 2.8% as unfavorable currency impacts of 7.8% were partially offset by a 5.0% increase in organic sales. Organic sales benefited from higher net selling prices of 7.8%, primarily from hyperinflationary economies, and product mix gains of 1.3%, partially offset by lower volumes.
Operating profit of $673 decreased 4.9% primarily due to unfavorable currency impacts, higher marketing, research and general expenses and lower volumes, partially offset by favorable pricing net of inflation. Pricing and unfavorable currency impacts were primarily driven by hyperinflationary economies.
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Quarterly Financial Data (Unaudited)
As discussed in Item 8, Note 1 to the Consolidated Financial Statements, the results of the IFP Business are reported as discontinued operations. The following tables provide unaudited summarized financial information based on our Consolidated Financial Statements after giving effect to the reporting of the IFP Business as discontinued operations for each quarter of fiscal year 2024 and 2023.
| 2024 | ||||||||||||||||||||||||||
| (In millions, except per share amounts) |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||||||||||||
| Net Sales | $ | 4,326 | $ | 4,231 | $ | 4,144 | $ | 4,104 | ||||||||||||||||||
| Gross Profit | 1,686 | 1,594 | 1,564 | 1,445 | ||||||||||||||||||||||
| Income from Continuing Operations | 556 | 464 | 823 | 349 | ||||||||||||||||||||||
| Income from Discontinued Operations, Net of Income Taxes | 102 | 89 | 92 | 103 | ||||||||||||||||||||||
| Net Income Attributable to Kimberly-Clark Corporation | 647 | 544 | 907 | 447 | ||||||||||||||||||||||
| Earnings Per Share - Basic: | ||||||||||||||||||||||||||
| Continuing operations | $ | 1.62 | $ | 1.35 | $ | 2.43 | $ | 1.03 | ||||||||||||||||||
| Discontinued operations | 0.30 | 0.26 | 0.27 | 0.31 | ||||||||||||||||||||||
| Basic Earnings per Share | $ | 1.92 | $ | 1.61 | $ | 2.70 | $ | 1.34 | ||||||||||||||||||
| Earnings Per Share - Diluted: | ||||||||||||||||||||||||||
| Continuing operations | $ | 1.61 | $ | 1.35 | $ | 2.42 | $ | 1.03 | ||||||||||||||||||
| Discontinued operations | 0.30 | 0.26 | 0.27 | 0.31 | ||||||||||||||||||||||
| Diluted Earnings per Share | $ | 1.91 | $ | 1.61 | $ | 2.69 | $ | 1.34 | ||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||
| (In millions, except per share amounts) |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||||||||||||
| Net Sales | $ | 4,338 | $ | 4,325 | $ | 4,321 | $ | 4,162 | ||||||||||||||||||
| Gross Profit | 1,518 | 1,570 | 1,640 | 1,541 | ||||||||||||||||||||||
| Income from Continuing Operations | 479 | 38 | 515 | 427 | ||||||||||||||||||||||
| Income from Discontinued Operations, Net of Income Taxes | 96 | 48 | 76 | 85 | ||||||||||||||||||||||
| Net Income Attributable to Kimberly-Clark Corporation | 566 | 102 | 587 | 509 | ||||||||||||||||||||||
| Earnings Per Share - Basic: | ||||||||||||||||||||||||||
| Continuing operations | $ | 1.39 | $ | 0.16 | $ | 1.51 | $ | 1.26 | ||||||||||||||||||
| Discontinued operations | 0.29 | 0.14 | 0.23 | 0.25 | ||||||||||||||||||||||
| Basic Earnings per Share | $ | 1.68 | $ | 0.30 | $ | 1.74 | $ | 1.51 | ||||||||||||||||||
| Earnings Per Share - Diluted: | ||||||||||||||||||||||||||
| Continuing operations | $ | 1.39 | $ | 0.16 | $ | 1.51 | $ | 1.25 | ||||||||||||||||||
| Discontinued operations | 0.28 | 0.14 | 0.22 | 0.25 | ||||||||||||||||||||||
| Diluted Earnings per Share | $ | 1.67 | $ | 0.30 | $ | 1.73 | $ | 1.50 | ||||||||||||||||||
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Liquidity and Capital Resources
As detailed in Item 8, Note 1 to the Consolidated Financial Statements, the Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations. As a result, unless specifically stated, the following discussion reflects Kimberly-Clark's consolidated results for all periods presented.
Cash Provided by Operations
Cash provided by operations for the year ended December 31, 2024 was $3.2 billion compared to $3.5 billion in the prior year. Cash flow from operations benefited from higher operating profit, excluding the effect of non-cash charges, however this increase was more than offset by changes in working capital relative to the prior year coupled with cash payments for the 2024 Transformation Initiative. The impact to cash from working capital was primarily driven by the timing of cash flows associated with the lapping of higher commodity and energy costs in prior periods.
Obligations
The following table presents our total contractual obligations on a consolidated basis for which cash flows are fixed or determinable.
| Total | 2025 | 2026 | 2027 | 2028 | 2029 | 2030+ | ||||||||||||||||||||||||||||||||||||||
| Long-term debt | $ | 7,451 | $ | 566 | $ | 410 | $ | 606 | $ | 700 | $ | 704 | $ | 4,465 | ||||||||||||||||||||||||||||||
| Interest payments on long-term debt | 2,814 | 272 | 252 | 246 | 223 | 189 | 1,632 | |||||||||||||||||||||||||||||||||||||
| Operating lease liabilities | 480 | 146 | 130 | 82 | 43 | 28 | 51 | |||||||||||||||||||||||||||||||||||||
| Unconditional purchase obligations | 2,188 | 1,507 | 427 | 226 | 10 | 3 | 15 | |||||||||||||||||||||||||||||||||||||
| Open purchase orders | 2,338 | 1,885 | 412 | 28 | 6 | 3 | 4 | |||||||||||||||||||||||||||||||||||||
| Total contractual obligations | $ | 15,271 | $ | 4,376 | $ | 1,631 | $ | 1,188 | $ | 982 | $ | 927 | $ | 6,167 | ||||||||||||||||||||||||||||||
The unconditional purchase obligations are for the purchase of raw materials, primarily superabsorbent materials, pulp and utilities. Although we are primarily liable for payments on the above operating leases and unconditional purchase obligations, based on historic operating performance and forecasted future cash flows, we believe exposure to losses, if any, under these arrangements is not material.
The open purchase orders displayed in the table represent amounts for goods and services we have negotiated for delivery.
The table does not include amounts where payments are discretionary or the timing is uncertain. The following payments are not included in the table:
•We will fund our defined benefit pension plans to meet or exceed statutory requirements and currently expect to contribute approximately $15 to these plans in 2025.
•Other postretirement benefit payments are estimated using actuarial assumptions, including expected future service, to project the future obligations. Based upon those projections, we anticipate making annual payments for these obligations of approximately $50 through 2034.
•Accrued income tax liabilities for uncertain tax positions, deferred taxes and noncontrolling interests.
Investing
Cash used for investing for the year ended December 31, 2024 was $100 compared to $418 in the prior year as capital spending in the current year was largely offset by proceeds from asset and business dispositions. Capital spending was $721 for the year ended December 31, 2024 compared to $766 in the prior year. Proceeds from asset and business dispositions of $651 primarily reflected the sale of our PPE business while prior year proceeds of $245 primarily reflected the sale of our Brazil tissue and professional business. We expect capital spending to be approximately $1.0 to $1.2 billion in 2025, including incremental spending from the 2024 Transformation Initiative.
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Financing
Cash used for financing for the year ended December 31, 2024 was $3.2 billion compared to $2.4 billion in the prior year. This increase was primarily due to increased share repurchases, debt repayments and dividends paid. During 2024, we repurchased 7.2 million shares of our common stock at a cost of $1.0 billion through a broker in the open market, and paid $1.6 billion in dividends.
We issue long-term debt in the public market periodically. Proceeds from the offerings are used for general corporate purposes, including repayment of maturing debt or outstanding commercial paper indebtedness. See Item 8, Note 7 to the Consolidated Financial Statements for details.
Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other similar short-term debt issued by non-U.S. subsidiaries, was $3 as of December 31, 2024 (included in debt payable within one year on the Consolidated Balance Sheets). The average month-end balance of short-term debt for the year ended December 31, 2024 was $5. These short-term borrowings provide supplemental funding to support our operations. The level of short-term debt generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as pension contributions, dividends and income taxes. We maintain a $2.0 billionrevolving credit facility which expires in June 2028and a $750 revolving credit facility which expires in May 2025. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.
As of December 31, 2024, total debt from continuing operations was $7.4 billion compared to $7.9 billion as of December 31, 2023.
In October 2021, members of the Organization for Economic Co-operation and Development/G20 Inclusive Framework on Base Erosion and Profit Shifting Project ("Inclusive Framework") agreed to a two-pillar solution to reform the international tax framework to realign international taxation with economic activities and value creation. Inclusive Framework members agreed to a coordinated system of Global anti-Base Erosion rules, referred to as Pillar 2, that are designed to ensure large multinational enterprises pay a minimum 15% level of tax on the income arising in each jurisdiction in which they operate. Many countries have formally implemented Pillar 2, and several other countries have draft legislation to implement this framework. The implementation of Pillar 2 has not had a material impact on our Consolidated Financial Statements. We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.
We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, obligations related to our 2024 Transformation Initiative, capital spending, pension contributions, share repurchases, dividends and other needs for the foreseeable future. Further, 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 business, liquidity, financial condition or results of operations for the foreseeable future.
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Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make significant 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 period. The critical accounting estimates we used in the preparation of the Consolidated Financial Statements are those that are important both to the presentation of our financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to accruals for sales incentives and trade promotion allowances, pension and other postretirement benefits, deferred income taxes and potential income tax assessments, and goodwill and other intangible assets. These critical accounting estimates have been reviewed with the Audit Committee of the Board of Directors.
Sales Incentives and Trade Promotion Allowances
Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions and other activities conducted by our customers to promote our products. Rebate and promotion accruals are based on estimates of the quantity of customer sales. 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. Generally, the estimated redemption value of consumer coupons and related expense are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories, and the cost is recorded when the related revenue from customers is realized. Our related accounting policies are discussed in Item 8, Note 1 to the Consolidated Financial Statements.
Employee Postretirement Benefits
Substantially all regular employees in the U.S. and the United Kingdom are covered by defined contribution retirement plans and certain U.S. and United Kingdom employees previously earned benefits covered by defined benefit pension plans that currently provide no future service benefit (the "Principal Plans"). Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. Our related accounting policies and account balances are discussed in Item 8, Note 9 to the Consolidated Financial Statements.
Changes in certain assumptions could affect pension expense and the benefit obligations, particularly the estimated long-term rate of return on plan assets and the discount rate used to calculate the obligations:
•Long-term rate of return on plan assets. The expected long-term rate of return is evaluated on an annual basis. In setting these assumptions, we consider a number of factors including projected future returns by asset class relative to the target asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered appropriate.
As of December 31, 2024, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.0 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, and whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required. If the expected long-term rate of return on assets for the Principal Plans were lowered by 0.25%, the impact on annual pension expense would not be material in 2025.
•Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation as of December 31, 2024 was based on a portfolio of high quality corporate debt securities with cash flows that largely match the expected benefit payments of the plan. For the United Kingdom plan, the discount rate was determined based on yield curves constructed from a portfolio of high quality corporate debt securities. Each year's expected future benefit payments were discounted to their present value at the appropriate yield curve rate to determine the pension obligations. If the discount rate assumptions for these same plans were reduced by 0.25%, the increase in annual pension expense would not be material in 2025, and the December 31, 2024 pension liability would increase by about $50.
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•Other assumptions. There are a number of other assumptions involved in the calculation of pension expense and benefit obligations, primarily related to participant demographics and benefit elections.
Pension expense for defined benefit pension plans is estimated to approximate $50 in 2025. Pension expense beyond 2025 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered participants in the plans.
Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. Changes in significant assumptions could affect the consolidated expense and benefit obligations, particularly the discount rate used to calculate the obligations and the health care cost trend rate:
•Discount rate. The determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefit section above, and the methodology for each country is the same as the methodology used to determine the discount rate for that country's pension obligation. If the discount rate assumptions for these plans were reduced by 0.25%, the impact to 2025 other postretirement benefit expense and the increase in the December 31, 2024 benefit liability would not be material.
•Health care cost trend rate. The health care cost trend rate is based on a combination of inputs including our recent claims history and insights from external advisers regarding recent developments in the health care marketplace, as well as projections of future trends in the marketplace.
Deferred Income Taxes and Potential Assessments
As a global organization, we are subject to income tax requirements in various jurisdictions in the U.S. and internationally. Changes in certain assumptions related to income taxes could significantly affect consolidated results, particularly with regard to valuation allowances on deferred tax assets, undistributed earnings of subsidiaries outside the U.S. and uncertain tax positions. Our income tax related accounting policies, account balances and matters affecting income taxes are discussed in Item 8, Note 14 to the Consolidated Financial Statements.
•Deferred tax assets and related valuation allowances. We have recorded deferred tax assets related to, among other matters, income tax loss carryforwards, income tax credit carryforwards and capital loss carryforwards and have established valuation allowances against these deferred tax assets. These carryforwards are primarily in non-U.S. taxing jurisdictions and in certain states in the U.S. Foreign tax credits earned in the U.S. in current and prior years, which cannot be used currently, also give rise to net deferred tax assets. In determining the valuation allowances to establish against these deferred tax assets, many factors are considered, including the specific taxing jurisdiction, the carryforward period, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
•Undistributed earnings. As of December 31, 2024, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $10.6 billion. Earnings of $3.4 billion were previously subject to U.S. federal income tax. Any additional taxes due with respect to such previously-taxed foreign earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes. Deferred taxes have been recorded on $932 of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute any remaining foreign earnings and therefore have not recorded deferred taxes for foreign and U.S. income taxes on such earnings. We consider any excess of the amount for financial reporting over the tax basis in our foreign subsidiaries to be indefinitely reinvested. The determination of deferred tax liabilities on the amount of financial reporting over tax basis or the remaining foreign earnings is not practicable.
•Uncertain tax positions. We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate. Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities
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may be affected by changing interpretations of laws, rulings by tax authorities or the expiration of the statute of limitations.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are not subject to amortization and are tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Intangible assets that are deemed to have finite lives are amortized over their useful lives, generally ranging from 4 to 20 years. We typically obtain the assistance of third-party valuation specialists to measure the acquisition date fair values of goodwill and other intangible assets acquired.
Events and conditions that could result in impairment include a sustained drop in the market price of our common shares, increased competition or loss of market share, obsolescence, product claims that result in a significant loss of sales or profitability over the product life, deterioration in macroeconomic conditions, or declining financial performance in comparison to projected results.
Goodwill
In our evaluation of goodwill impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is more than its carrying value. Qualitative factors include macroeconomic, industry and competitive conditions, legal and regulatory environments, 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 to estimate fair value must be performed. When a quantitative test is considered necessary, estimates of fair value for goodwill impairment testing are determined based on a discounted cash flow model and a market-based approach. We use inputs from our long-range planning process to determine growth rates for sales and earnings. The other key estimates and factors used in the discounted cash flow model include, but are not limited to, discount rates, actual business trends experienced, commodity prices, foreign exchange rates, inflation and terminal growth rates.
We completed our required annual assessment of goodwill for impairment for all our reporting units using a qualitative assessment as of the first day of the third quarter of the year ended December 31, 2024, concluding that it was more likely than not that the fair value of each reporting unit significantly exceeded the respective carrying amounts.
During the fourth quarter of 2024, our internal reporting and management structure changed, resulting in changes in the composition of our reportable segments and reporting units.
As a result of these changes, we reassigned assets and liabilities to the applicable reporting units and allocated goodwill using a relative fair value approach. As this change in the composition of our reporting units was considered a goodwill triggering event, we performed an impairment test on both a pre- and post- reorganization basis. In both cases, we concluded there was no goodwill impairment as the fair value of each reporting unit significantly exceeded the respective carrying amounts.
Other Intangible Assets
We evaluate the useful lives of our other intangible assets, primarily brands, to determine if they are finite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.
Our estimate of the fair value of our brand assets is based on a discounted cash flow model and a market-based approach using inputs which include projected revenues from our long-range plan, assumed royalty rates that could be payable if we did not own the brands, and a discount rate. The cash flows used in the discounted cash flow model are consistent with those we use in our internal planning, which gives consideration to actual business trends experienced and the long-term business strategy.
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We performed our 2024 impairment assessment of our intangible assets as of the first day of the third quarter using a qualitative assessment. Other than discussed in Item 8, Note 5 to the Consolidated Financial Statements, no additional impairment indicators were found to be present.
New Accounting Standards
See Item 8, Note 1 to the Consolidated Financial Statements for a description of recent accounting standards and their anticipated effects on our Consolidated Financial Statements.
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