Item 7. 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 and prospects. This discussion and analysis compares 2017 results to 2016, and 2016 results to 2015. The reference to "N.M." indicates that the calculation is not meaningful. In addition, we provide commentary regarding organic sales growth, which describes the impact of changes in volume, product mix and net selling prices on net sales. Changes in foreign currency rates and acquisitions and divestitures also impact the year-over-year change in net sales. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

The following will be discussed and analyzed:

•	Overview of Business

•	Overview of 2017 Results

•	Results of Operations and Related Information

•	Unaudited Quarterly Data

•	Liquidity and Capital Resources

•	Critical Accounting Policies and Use of Estimates

•	Legal Matters

•	New Accounting Standards

•	Business Outlook

•	Information Concerning Forward-Looking Statements

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. These measures include adjusted gross and operating profit, adjusted net income, adjusted earnings per share, adjusted other (income) and expense, net, and adjusted effective tax rate. 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.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, and they should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items being excluded. We compensate for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures.

The non-GAAP financial measures exclude the following items for the relevant time periods as indicated in the reconciliations included later in this MD&A:

•	U.S. Tax Reform Related Matters - In the fourth quarter of 2017, we recognized a net benefit as a result of U.S. tax reform and related activities.

•

2014 Organization Restructuring - In 2014, we initiated this restructuring in order to improve organization efficiency and offset the impact of stranded overhead costs resulting from the 2014 spin-off of our health care business. As a result, we recognized restructuring charges in 2014, 2015 and 2016. Restructuring actions were completed by December 31, 2016. See Item 8, Note 2 to the consolidated financial statements for details.

•	Adjustments Related to Venezuelan Operations - Results in 2016 and 2015 include adjustments for the deconsolidation of our Venezuelan operations, and in 2015 include charges for remeasuring the local currency balance sheet in Venezuela. See Item 8, Note 1 to the consolidated financial statements for details.

	11	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

•	Pension Settlement Charges - In 2015, we recorded settlement-related charges from certain actions taken for our U.S. pension plan. See Item 8, Note 6 to the consolidated financial statements for details.

•	Uncertain Tax Positions Adjustment - In 2015, we updated our assessment of uncertain tax positions for certain international operations, and recorded a charge related to prior years in provision for income taxes. See Item 8, Note 11 to the consolidated financial statements for details.

•	Turkey Restructuring - In 2015, we recorded charges related to the restructuring of our operations in Turkey.

Overview of Business

We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 36 countries and products sold in more than 175 countries. Our products are sold under well-known brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. We have three reportable business segments: Personal Care, Consumer Tissue and KCP. These business segments are described in greater detail in Item 8, Note 13 to the consolidated financial statements.

In operating our business, we seek to:

•	manage our portfolio to balance growth, profit margin and cash flow,

•	invest in our brands, innovation and growth initiatives,

•	deliver sustainable cost reductions, and

•	provide disciplined capital management to improve return on invested capital and return cash to shareholders.

We describe our business outside North America in two groups – Developing and Emerging Markets and Developed Markets. Developing and Emerging Markets comprise Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Developed Markets consist of Western and Central Europe, Australia and South Korea.

Highlights for 2017 include the following:

•	Net sales of $18.3 billion increased slightly compared to 2016. Favorable changes in foreign currency exchange rates benefited sales by less than 1 percent.

•	In North America, organic sales were down 2 percent in consumer products and similar year-on-year in K-C Professional.

•	Outside North America, organic sales increased 3 percent in developing and emerging markets but fell 3 percent in developed markets.

•	We achieved $450 of cost savings from our ongoing FORCE (Focused On Reducing Costs Everywhere) program.

•	Diluted earnings per share were $6.40 in 2017 compared to $5.99 in 2016, including a net benefit from the 2017 U.S. tax reform and related matters.

•	We continued to focus on generating cash flow and allocating capital to shareholders. We raised our dividend in 2017 by 5.4 percent, the 45th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2017 amounted to $2.3 billion.

We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" in this Form 10-K for additional information.

Overview of 2017 Results

•	Net sales of $18.3 billion increased slightly compared to prior year, as changes in foreign currency exchange rates benefited sales by less than 1 percent.

•	Operating profit and Net Income Attributable to Kimberly-Clark Corporation were $3,299 and $2,278 in 2017 and $3,317 and $2,166 in 2016, respectively.

•	Diluted earnings per share were $6.40 in 2017 compared to $5.99 in 2016. Results in 2017 included a net benefit of $0.17 as a result of U.S. tax reform and related activities.

	12	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

Results of Operations and Related Information

This section presents a discussion and analysis of net sales, operating profit and other information relevant to an understanding of 2017 results of operations.

Consolidated

Selected Financial Results	Year Ended December 31
	2017				2016				Change 2017 vs. 2016			2015				Change 2016 vs. 2015
Net Sales:
North America	$	9,390			$	9,545			-2	%		$	9,531			—
Outside North America	9,186				8,964				+2	%		9,458				-5	%
Intergeographic sales	(317		)		(307		)		+3	%		(398		)		-23	%
Total Net Sales	18,259				18,202				—			18,591				-2	%
Operating Profit:
North America	2,283				2,322				-2	%		2,180				+7	%
Outside North America	1,291				1,255				+3	%		1,368				-8	%
Corporate & Other(a)	(248		)		(252		)		N.M.			(367		)		N.M.
Other (income) and expense, net(a)	27				8				N.M.			1,568				N.M.
Total Operating Profit	3,299				3,317				-1	%		1,613				+106	%
Provision for income taxes	(776		)		(922		)		-16	%		(418		)		+121	%
Share of net income of equity companies	104				132				-21	%		149				-11	%
Net Income Attributable to Kimberly-Clark Corporation	2,278				2,166				+5	%		1,013				+114	%
Diluted Earnings per Share	6.40				5.99				+7	%		2.77				+116	%

(a)	Corporate & Other and Other (income) and expense, net includes income and expenses not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations.

GAAP to Non-GAAP Reconciliations of Selected Financial Results

		Twelve Months Ended December 31, 2017
		As Reported				U.S. Tax Reform Related Matters				As Adjusted Non-GAAP
Other (income) and expense, net		$	27			$	24			$	3
Operating Profit		3,299				(24		)		3,323
Income before income taxes and equity interests		2,991				(24		)		3,015
Provision for income taxes		(776		)		85				(861		)
Effective tax rate		25.9		%		—				28.6		%
Net Income Attributable to Kimberly-Clark Corporation		2,278				61				2,217
Diluted Earnings per Share		6.40				0.17				6.23

	13	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

		Twelve Months Ended December 31, 2016
		As Reported				Charges for 2014 Organization Restructuring				Adjustment Related to Venezuelan Operations				As Adjusted Non-GAAP
Cost of products sold		$	11,551			$	6			$	—			$	11,545
Marketing, research and general expenses		3,326				32				—				3,294
Other (income) and expense, net		8				(3		)		(11		)		22
Operating Profit		3,317				(35		)		11				3,341
Income before income taxes and equity interests		3,009				(35		)		11				3,033
Provision for income taxes		(922		)		8				—				(930		)
Effective tax rate		30.6		%		—				—				30.7		%
Net Income Attributable to Kimberly-Clark Corporation		2,166				(27		)		11				2,182
Diluted Earnings per Share		5.99				(0.07		)		0.03				6.03

		Twelve Months Ended December 31, 2015
		As Reported				Charges Related to Venezuelan Operations				Uncertain Tax Positions Adjustment				Charges for Pension Settlements				Charges for 2014 Organization Restructuring				Charges for Turkey Restructuring				As Adjusted Non-GAAP
Cost of products sold		$	11,967			$	5			$	—			$	—			$	23			$	22			$	11,917
Marketing, research and general expenses		3,443				—				—				—				40				1				3,402
Other (income) and expense, net		1,568				148				—				1,358				—				—				62
Operating Profit		1,613				(153		)		—				(1,358		)		(63		)		(23		)		3,210
Income before income taxes and equity interests		1,335				(153		)		—				(1,358		)		(63		)		(23		)		2,932
Provision for income taxes		(418		)		6				(49		)		523				21				—				(919		)
Effective tax rate		31.3		%		—				—				—				—				—				31.3		%
Net Income Attributable to Kimberly-Clark Corporation		1,013				(147		)		(49		)		(835		)		(42		)		(23		)		2,109
Diluted Earnings per Share(a)		2.77				(0.40		)		(0.13		)		(2.28		)		(0.11		)		(0.06		)		5.76

(a) "As Adjusted Non-GAAP" does not equal "As Reported" plus adjustments as a result of rounding.

Analysis of Consolidated Results

Net Sales		Percent Change						Adjusted Operating Profit		Percent Change
		2017 vs. 2016			2016 vs. 2015					2017 vs. 2016			2016 vs. 2015
Volume		1			2			Volume		1			5
Net Price		(1	)		—			Net Price		(8	)		(1	)
Mix/Other		—			—			Input Costs		(11	)		2
Currency		1			(4	)		Cost Savings		13			14
Total(a)		—			(2	)		Currency Translation		1			(3	)
								Other(c)		3			(13	)
Organic(b)		—			2			Total		(1	)		4

(a)	Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b)	Combined impact of changes in volume, net price and mix/other.

(c)	Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

	14	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

2017 vs. 2016

Net sales of $18.3 billion were up slightly compared to the year-ago period. Favorable foreign currency rates benefited sales by less than 1 percent. Organic sales were similar year-on-year, as sales volumes increased about 1 percent. Changes in product mix increased sales slightly, while changes in net selling prices decreased sales by more than 1 percent. Operating profit was $3,299 in 2017 and $3,317 in 2016. Adjusted operating profit was $3,323 in 2017 and $3,341 in 2016. Results were impacted by lower net selling prices and $355 of higher input costs. The comparison benefited from volume growth, $450 of FORCE cost savings and lower marketing, research and general spending.

The effective tax rate of 25.9 percent in 2017 decreased compared to 30.6 percent in 2016. The rate in 2017 included a net benefit as a result of U.S. tax reform and related activity. This amount included a net expense of $278 for the transition tax and a net benefit of $202 for the remeasurement of deferred taxes associated with the corporate rate reduction and our reassessment of permanently reinvested earnings. In addition, it included a net benefit of $152 for certain tax planning actions that were taken in the fourth quarter of 2017 in anticipation of the enactment of the Tax Act. See additional details in Item 8, Note 11 to the consolidated financial statements. The adjusted effective rate was 28.6 percent in 2017 and 30.7 percent in 2016.

Our share of net income of equity companies was $104 in 2017 and $132 in 2016. Kimberly-Clark de Mexico, S.A.B. de C.V. ("KCM") results in 2017 were impacted by higher input costs, partially offset by benefits from sales growth and cost savings.

Diluted earnings per share was $6.40 in 2017 and $5.99 in 2016 and adjusted earnings per share were $6.23 in 2017 and $6.03 in 2016. The change was driven by a lower share count and higher earnings.

2016 vs. 2015

Net sales of $18.2 billion decreased 2 percent compared to 2015, as changes in foreign currency exchange rates reduced sales by about 4 percent. Organic sales increased approximately 2 percent due to higher volumes. Operating profit was $3,317 in 2016 versus $1,613 in 2015. Results in 2015 included $1,358 of pension settlement charges and $153 of charges related to our Venezuelan operations. Adjusted operating profit of $3,341 in 2016 increased 4 percent compared to $3,210 in 2015. Results in 2016 included benefits from organic sales growth, $435 of FORCE cost savings and $70 of savings from the 2014 Organization Restructuring. In addition, input costs were $65 lower. Translation effects due to changes in foreign currency exchange rates lowered operating profit by $90 and transaction effects also negatively impacted results.

Adjusted other (income) and expense, net of $22 in 2016 decreased compared to $62 in 2015 due to higher currency transaction losses in 2015. The decrease in our effective tax rate of 30.6 percent in 2016 compared to 31.3 percent in 2015 is primarily due to certain planning initiatives. Our share of net income of equity companies was $132 in 2016 and $149 in 2015. KCM results in 2016 compared to 2015 were negatively impacted by a weaker Mexican peso and higher input costs, partially offset by benefits from organic sales growth and cost savings.

Diluted earnings per share were $5.99 in 2016 and $2.77 in 2015. The increase in adjusted earnings per share of $6.03 in 2016 compared to $5.76 in 2015 was due to higher earnings and lower share counts.

	15	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

Business Segments

Personal Care

		2017				2016				2015						2017				2016				2015
Net Sales		$	9,078			$	9,046			$	9,204			Operating Profit		$	1,907			$	1,857			$	1,885

Net Sales		Percent Change						Operating Profit		Percent Change
		2017 vs. 2016			2016 vs. 2015					2017 vs. 2016			2016 vs. 2015
Volume		1			4			Volume		2			8
Net Price		(2	)		(1	)		Net Price		(9	)		(4	)
Mix/Other		1			—			Input Costs		(7	)		2
Currency		1			(5	)		Cost Savings		14			14
Total(a)		—			(2	)		Currency Translation		1			(3	)
								Other(c)		2			(18	)
Organic(b)		(1	)		3			Total		3			(1	)

(a)	Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b)	Combined impact of changes in volume, net price and mix/other.

(c)	Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

2017 vs. 2016

Net sales of $9.1 billion was up slightly compared to 2016. Favorable currency rates and higher sales volumes increased sales by 1 percent each, while changes in net selling prices decreased sales by 2 percent. Operating profit of $1,907 increased 3 percent. The comparison benefited from volume growth, cost savings and reduced marketing, research and general spending, mostly offset by lower net selling prices and input cost inflation.

Net sales in North America decreased 2 percent. Changes in net selling prices reduced sales by more than 1 percent, including higher promotion spending in most categories, and volumes decreased slightly. Adult care volumes increased mid-single digits, including benefits from market growth and innovations on our Poise and Depend brands. On the other hand, volumes in the infant and child care mega-category were down low single digits. Although volumes increased in Pull-Ups training pants, Huggies diaper volumes were down, impacted by competitive activity and a lower U.S. birth rate.

Net sales in developing and emerging markets increased 6 percent as sales volumes increased 5 percent and favorable currency rates increased sales by 1 percent. Sales benefited by 1 percent from changes in product mix and an additional slight benefit from our acquisition of our joint venture in India, offset by lower net selling prices of about 2 percent. The volume increase was driven by gains in Latin America, primarily Argentina and Brazil, China, Eastern Europe and Middle East/Africa.

Net sales in developed markets outside North America decreased about 6 percent. Sales volumes decreased 6 percent and changes in net selling prices decreased sales by 3 percent, partially offset by favorable currency rates of more than 1 percent and improved product mix of 1 percent. The volume declines were mostly in South Korea, which was impacted by a lower birth rate.

2016 vs. 2015

Net sales of $9.0 billion in 2016 decreased 2 percent compared to 2015. Unfavorable currency rates decreased sales by 5 percent while sales volumes increased 4 percent. Changes in net selling prices decreased sales by 1 percent. Operating profit of $1,857 decreased 1 percent. The comparison was impacted by unfavorable currency effects and higher marketing, research and general expenses on a local currency basis, mostly offset by organic sales growth and cost savings.

Net sales in North America increased 2 percent. Sales volumes increased 4 percent, while lower net selling prices reduced sales by 2 percent. Child care volumes increased high-single digits and adult care volumes rose in the mid-single digits, as both businesses benefited from category growth and innovations launched in the last 12 months. Volumes on Huggies baby wipes rose mid-single digits. Huggies diapers volumes were down low-single digits, although market shares were up slightly.

	16	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

Net sales in developing and emerging markets decreased 6 percent, including an 11 percent negative impact from unfavorable currency rate changes. This was partially offset by sales volume increases of 4 percent and changes in net selling prices that increased sales by 1 percent. Volume growth included gains in China, Eastern Europe, Africa and Central America, while volumes declined in Argentina and Brazil. Net selling prices increased in Argentina and Brazil, but decreased in China.

Net sales in developed markets outside North America decreased 2 percent. Currency rates were unfavorable by 3 percent. Sales volumes increased 2 percent and product mix was favorable 1 percent, while changes in net selling prices decreased sales by 2 percent.

Consumer Tissue

		2017				2016				2015						2017				2016				2015
Net Sales		$	5,932			$	5,967			$	6,121			Operating Profit		$	1,034			$	1,117			$	1,073

Net Sales		Percent Change						Operating Profit		Percent Change
		2017 vs. 2016			2016 vs. 2015					2017 vs. 2016			2016 vs. 2015
Volume		—			—			Volume		(2	)		1
Net Price		(1	)		—			Net Price		(5	)		2
Mix/Other		—			(1	)		Input Costs		(14	)		4
Currency		1			(2	)		Cost Savings		11			10
Total(a)		(1	)		(3	)		Currency Translation		—			(1	)
								Other(c)		3			(12	)
Organic(b)		(1	)		—			Total		(7	)		4

(a)	Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b)	Combined impact of changes in volume, net price and mix/other.

(c)	Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

2017 vs. 2016

Net sales of $5.9 billion decreased slightly compared to prior year. Changes in net selling prices decreased sales by 1 percent, mostly offset by favorable currency rates. Operating profit of $1,034 decreased 7 percent. The comparison was impacted by lower sales and input cost inflation, partially offset by cost savings and reduced marketing, research and general spending.

Net sales in North America decreased about 3 percent compared to prior year. Sales volumes decreased by 2 percent and changes in net selling prices decreased sales slightly. Sales volumes were down in bathroom tissue and facial tissue, and up in paper towels.

Net sales in developing and emerging markets increased 5 percent as sales volumes increased 5 percent, primarily in Latin America. Favorable currency rates increased sales by about 4 percent, while changes in net selling prices and product mix decreased sales by 3 percent and 1 percent, respectively.

Net sales in developed markets outside North America decreased about 1 percent. Changes in net selling prices decreased sales by 1 percent and sales volumes were slightly lower, partially offset by improved product mix.

2016 vs. 2015

Net sales of $6.0 billion in 2016 decreased 3 percent compared to 2015 as unfavorable currency rates and changes in product mix reduced sales by 2 percent and 1 percent, respectively. Operating profit of $1,117 increased 4 percent compared to prior year. The comparison benefited from cost savings and lower input costs, partially offset by unfavorable foreign currency effects.

Net sales in North America were essentially even with the prior year. Sales volumes increased by 1 percent, with increases in all product categories, while product mix was unfavorable by 1 percent.

Net sales in developing and emerging markets decreased 7 percent as unfavorable currency rates reduced sales by about 7 percent. Sales volumes decreased about 4 percent, primarily in Latin America, while changes in net selling prices increased sales by 3 percent.

	17	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

Net sales in developed markets outside North America decreased 4 percent as unfavorable currency effects reduced sales by 4 percent. Sales volumes increased 1 percent, mostly in Australia, while changes in net selling prices decreased sales by 1 percent.

K-C Professional

		2017				2016				2015						2017				2016				2015
Net Sales		$	3,208			$	3,150			$	3,219			Operating Profit		$	633			$	603			$	590

Net Sales		Percent Change						Operating Profit		Percent Change
		2017 vs. 2016			2016 vs. 2015					2017 vs. 2016			2016 vs. 2015
Volume		1			—			Volume		3			1
Net Price		(1	)		1			Net Price		(3	)		4
Mix/Other		—			(1	)		Input Costs		(12	)		(1	)
Currency		1			(2	)		Cost Savings		12			9
Total(a)		2			(2	)		Currency Translation		1			(2	)
								Other(c)		4			(9	)
Organic(b)		1			—			Total		5			2

(a)	Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b)	Combined impact of changes in volume, net price and mix/other.

(c)	Includes the impact of changes in marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

2017 vs. 2016

Net sales of $3.2 billion in 2017 increased 2 percent compared to 2016, including the benefit of favorable currency rates of 1 percent. The combined impact from sales volume growth and changes in net selling prices increased sales by 1 percent. Operating profit of $633 increased 5 percent. The comparison benefited from cost savings and lower marketing, research and general spending, partially offset by input cost inflation.

Net sales in North America increased about 1 percent. Sales volumes increased more than 1 percent, including growth in safety and other product categories. Changes in net selling prices decreased sales by about 1 percent.

Net sales in developing and emerging markets increased 5 percent as favorable currency rates increased sales by 3 percent. Sales volumes increased 1 percent, and the combined impact of changes in product mix and net selling prices increased sales by 1 percent.

Net sales in developed markets outside North America increased 3 percent as sales volumes and higher net selling prices each increased sales by 1 percent. Favorable currency rates benefited sales slightly.

2016 vs. 2015

Net sales of $3,150 in 2016 decreased 2 percent compared to 2015 as unfavorable currency rate changes decreased sales by about 2 percent, partially offset by changes in net selling prices that increased sales by about 1 percent. Operating profit of $603 increased 2 percent. The comparison benefited from higher selling prices and cost savings, partially offset by unfavorable currency effects and higher marketing, research and general expenses on a local currency basis.

Net sales in North America increased 2 percent. Sales volumes increased 1 percent, mostly due to growth in washroom products, and the combined impact of changes in net selling prices and product mix increased sales by 1 percent.

Net sales in developing and emerging markets decreased 3 percent as unfavorable changes in currency rates reduced sales by 8 percent. Changes in net selling prices increased sales by 5 percent and product mix improved sales by 1 percent, while sales volumes decreased by 1 percent.

Net sales in developed markets outside North America were down 5 percent, including a 3 percent negative impact from unfavorable currency rates. Changes in net selling prices reduced sales by 2 percent and sales volumes decreased 1 percent, while product mix increased sales by 1 percent.

	18	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

2018 Global Restructuring Program

On January 23, 2018, we announced a new global restructuring program. The 2018 Global Restructuring Program will reduce our structural cost base by streamlining and simplifying the company’s manufacturing supply chain and overhead organization. The program will make our overhead organization structure and manufacturing supply chain less complex and more efficient. We expect to close or sell approximately 10 manufacturing facilities and expand production capacity at several others. We expect to exit or divest some lower-margin businesses that generate approximately 1 percent of our net sales. The sales are concentrated in our consumer tissue business segment. The restructuring is expected to impact all of our business segments and our organizations in all major geographies. Workforce reductions are expected to be in the range of 5,000 to 5,500. Certain capital appropriations under the 2018 Global Restructuring Program are being finalized. Accounting for actions related to each appropriation will commence when the appropriation is authorized for execution.

The restructuring is expected to be completed by the end of 2020, with total costs anticipated to be $1.7 billion to $1.9 billion pre-tax ($1.35 billion to $1.5 billion after tax). Cash costs are expected to be $900 to $1.0 billion, primarily related to workforce reductions. Non-cash charges are primarily related to incremental depreciation and asset write-offs. Annual pre-tax savings from the restructuring are expected to be $500 to $550 by 2021. In addition, to implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2020. Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax ($950 to $1.05 billion after tax). We expect to generate savings of $50 to $70 in 2018.

Unaudited Quarterly Data

	2017																2016
	Fourth				Third				Second				First				Fourth				Third				Second				First
Net Sales	$	4,582			$	4,640			$	4,554			$	4,483			$	4,544			$	4,594			$	4,588			$	4,476
Gross Profit	1,598				1,659				1,644				1,652				1,678				1,670				1,664				1,639
Operating Profit	812				854				799				834				839				836				838				804
Net Income	625				579				540				575				518				563				578				560
Net Income Attributable to Kimberly-Clark Corporation	617				567				531				563				505				550				566				545
Per Share Basis-Diluted	1.75				1.60				1.49				1.57				1.40				1.52				1.56				1.50
Cash Dividends Declared Per Share	0.97				0.97				0.97				0.97				0.92				0.92				0.92				0.92
Market Price Per Share
High	123.77				130.00				134.29				136.21				125.76				138.87				138.76				136.61
Low	109.67				115.91				125.55				113.71				111.30				121.20				123.52				121.50
Close	120.66				117.68				129.11				131.63				114.12				126.14				137.48				134.51

Liquidity and Capital Resources

Cash Provided by Operations

Cash provided by operations was $2.9 billion in 2017 compared to $3.2 billion in 2016. The decrease was driven by higher tax payments. Cash provided by operations was $2.3 billion in 2015. The increase in 2016 compared to 2015 was driven by improved working capital and lower pension contributions.

	19	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

Obligations

The following table presents our total contractual obligations for which cash flows are fixed or determinable.

	Total				2018				2019				2020				2021				2022				2023+
Long-term debt	$	6,892			$	407			$	714			$	760			$	251			$	298			$	4,462
Interest payments on long-term debt	3,084				222				201				188				170				163				2,140
Operating leases	610				170				130				99				65				48				98
Unconditional purchase obligations	1,173				699				206				204				8				5				51
Open purchase orders	1,907				1,808				86				10				2				1				—
Total contractual obligations	$	13,666			$	3,306			$	1,337			$	1,261			$	496			$	515			$	6,751

•

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 up to $100 to these plans in 2018.

•	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 ranging from $58 in 2018 to more than $60 by 2027.

•	Accrued income tax liabilities for uncertain tax positions, deferred taxes and noncontrolling interests.

Investing

Our capital spending was $0.8 billion in 2017 and 2016. We expect capital spending to be approximately $1.1 billion in 2018, including incremental spending from the 2018 Global Restructuring Program.

Financing

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 4 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 $547 as of December 31, 2017 (included in debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the fourth quarter of 2017 was $419 and for the twelve months ended December 31, 2017 was $417. These short-term borrowings provide supplemental funding for supporting 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.

At December 31, 2017, total debt was $7.4 billion compared to $7.6 billion at December 31, 2016.

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.

We paid $1.4 billion in dividends in 2017. The Board of Directors approved a dividend increase of 3.1 percent for 2018. We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs.

	20	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

During 2017, we repurchased 7.2 million shares of our common stock at a cost of $900 through a broker in the open market. We are targeting full-year 2018 share repurchases between $700 and $900, subject to market conditions.

Management believes 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, capital spending, payment of dividends, pension plan contributions 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.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 period. The critical accounting policies 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. These critical accounting policies 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, end-of-aisle or in-store product displays 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 estimates for consumer coupon costs are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories. Our related accounting policies are discussed in Item 8, Note 1 to the consolidated financial statements. The accounting policies for these programs did not materially change with the adoption, on January 1, 2018, of the Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers.

Employee Postretirement Benefits

We have defined benefit pension plans in the U.S. and the United Kingdom (the "Principal Plans") and/or defined contribution retirement plans covering substantially all regular employees. 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 6 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 rates 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, 2017, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.5 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, including whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required. If the expected long-term rates of return on assets for the Principal Plans were lowered by 0.25 percent, the impact on annual pension expense would not be material in 2018.

•

Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 2017 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.

	21	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

If the discount rate assumptions for these same plans were reduced by 0.25 percent, the increase in annual pension expense would not be material in 2018, and the December 31, 2017 pension liability would increase by about $145.

•	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 $35 in 2018. Pension expense beyond 2018 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. The estimate of pension expense for 2018 does not include any potential effects related to the 2018 Global Restructuring Program (see Item 8, Note 15 to the consolidated financial statements).

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 rates 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 percent, the impact to 2018 other postretirement benefit expense and the increase in the December 31, 2017 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.

Our related accounting policies, account balances and the effects of a one percentage point change in the health care cost trend rate are discussed in Item 8, Note 6 to the consolidated financial statements.

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 11 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. Deferred taxes have been recorded for foreign and U.S. state income taxes on $1.0 billion of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute $4.5 billion of earnings of foreign consolidated subsidiaries taxed as part of the transition tax and have not recorded any deferred taxes related to such amounts for foreign and U.S. state income taxes. We consider any excess of the amount for financial reporting over the tax basis of our investment in our foreign subsidiaries to be indefinitely reinvested. At this time, the determination of deferred tax liabilities on this amount 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

	22	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities or the expiration of the statute of limitations.

Legal Matters

We are party to certain legal proceedings relating to our former health care business, Halyard, which we spun-off on October 31, 2014. This includes Bahamas Surgery Center v. Kimberly-Clark Corporation, et al., a California consumer class action relating to the sale of surgical gowns. On April 7, 2017, the jury awarded the plaintiff class $3.9 in compensatory damages and $350 in punitive damages against us. We have filed motions challenging the jury’s verdict as we believe it is contrary to the evidence presented at trial and that the punitive damage award is baseless, excessive and not consistent with California and federal laws. Under the terms of the distribution agreement we entered into with Halyard in connection with the spin-off, Halyard is obligated to indemnify us for legal proceedings, claims and other liabilities primarily related to our former health care business. Halyard and Kimberly-Clark have each filed suits against the other seeking declaratory judgment regarding the scope of these indemnification obligations. We are also party to additional legal proceedings relating to Halyard, including civil actions, qui tam matters, a shareholder derivative suit, a securities class action and certain subpoena and document requests from the federal government. Although the results of litigation and claims cannot be predicted with certainty, we continue to believe that the final outcome of these matters will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity.

New Accounting Standards

See Item 8, Note 1 to the consolidated financial statements for a description of new accounting standards and their anticipated effects on our consolidated financial statements.

Business Outlook

In 2018, we plan to continue to execute our Global Business Plan strategies, which include a focus on targeted growth initiatives, innovation and brand building, cost savings programs and shareholder-friendly capital allocation. In 2018, we expect earnings per share to be $3.90 to $4.50. Adjusted earnings per share are expected to be $6.90 to $7.20, which excludes 2018 Global Restructuring Program charges equivalent to $2.70 to $3.00. Our adjusted earnings per share guidance is based on the assumptions described below:

•	We expect net sales to increase 1 to 2 percent. We anticipate changes in foreign currency exchange rates to have a neutral to 1 percent positive impact on net sales, and the acquisition of our joint venture in India should benefit sales slightly.

•	We expect organic sales to increase approximately 1 percent, driven by higher sales volumes. Changes in net selling prices and product mix are expected to be similar, or up slightly, year-on-year.

•	We expect adjusted operating profit growth of 2 to 5 percent.

•	We plan to achieve cost savings of approximately $400 from our FORCE program, and $50 to $70 from the 2018 Global Restructuring Program.

•	We expect inflation in key cost inputs of $300 to $400. We anticipate the majority of the inflation to occur in international markets.

•	We expect interest expense to be down approximately 20 percent.

•	We expect an adjusted effective tax rate of 23 to 26 percent.

•	We expect net income from equity companies similar, or up slightly, year-on-year.

Information Concerning Forward-Looking Statements

Certain matters contained in this report concerning the business outlook, including the anticipated cost savings from our FORCE program, costs and savings from the 2018 Global Restructuring Program, cash flow and uses of cash, growth initiatives, innovations, marketing and other spending, net sales, anticipated currency rates and exchange risks, raw material, energy and other input costs, effective tax rate, contingencies and anticipated transactions of Kimberly-Clark, including dividends, share repurchases and pension contributions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are based upon management's expectations and beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.

	23	KIMBERLY-CLARK CORPORATION - 2017 Annual Report

The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control, including fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, potential competitive pressures on selling prices for our products, energy costs and retail trade customer actions, as well as general economic and political conditions globally and in the markets in which we do business, could affect the realization of these estimates.

The factors described under Item 1A, "Risk Factors" in this Form 10-K, or in our other SEC filings, among others, could cause our future results to differ from those expressed in any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.