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 2018 results to 2017, and 2017 results to 2016. 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 2018 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

Certain prior period financial information related to our adoption of Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU No. 2017-07") and the classification of costs associated with sales of K-C Professional (“KCP”) dispensers has been recast. The recast has no impact on our earnings or earnings per share in any period. See Item 8, Note 1 to the consolidated financial statements for details.

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:

•	2018 Global Restructuring Program - In 2018, we initiated a restructuring program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. See Item 8, Note 2 to the consolidated financial statements for details.

•	U.S. Tax Reform Related Matters - In 2018 and 2017, we recognized a net charge and a net benefit, respectively, associated with U.S. tax reform related matters. See Item 8, Note 12 to the consolidated financial statements for details.

	11	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

•

2014 Organization Restructuring - In 2014, we initiated a 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 3 to the consolidated financial statements for details.

•	Adjustment Related to Venezuelan Operations - Results in 2016 include other income related to the deconsolidation of our Venezuelan operations. See Item 8, Note 1 to the consolidated financial statements for details.

Overview of Business

We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 33 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 14 to the consolidated financial statements.

In operating our business, we seek to:

•	grow our portfolio of brands through innovation, category development and commercial execution,

•	leverage our cost and financial discipline to fund growth and improve margins, and

•	allocate capital in value-creating ways.

We describe our business outside North America in two groups – Developing and Emerging Markets ("D&E") and Developed Markets. D&E 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 2018 include the following:

•	Net sales of $18.5 billion increased 1 percent compared to 2017. Organic sales growth of more than 1 percent was partially offset by unfavorable changes in foreign currency exchange rates.

•	In North America, organic sales increased 3 percent in K-C Professional and 1 percent in consumer products.

•	Outside North America, organic sales increased 2 percent in D&E Markets and 1 percent in Developed Markets.

•	Input cost inflation of $795 was partially offset by $375 in cost savings from our FORCE (Focused On Reducing Costs Everywhere) program and $135 in cost savings from the 2018 Global Restructuring Program.

•	Diluted earnings per share were $4.03 in 2018 compared to $6.40 in 2017, including charges from the 2018 Global Restructuring Program and U.S. tax reform related matters in 2018 and a net benefit from U.S. tax reform related matters in 2017.

•	We continue to focus on generating cash flow and allocating capital to shareholders. Cash provided by operations was $3.0 billion in 2018. We raised our dividend in 2018 by 3.1 percent, the 46th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2018 amounted to $2.2 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 2018 Results

•	Net sales of $18.5 billion increased 1 percent compared to the prior year, as growth in organic sales of more than 1 percent was partially offset by unfavorable changes in foreign currency exchange rates.

•	Operating profit and Net Income Attributable to Kimberly-Clark Corporation were $2,229 and $1,410 in 2018 and $3,358 and $2,278 in 2017, respectively.

•	Diluted earnings per share were $4.03 in 2018 compared to $6.40 in 2017. Results in 2018 included charges from the 2018 Global Restructuring Program of $2.24 and a net charge of $0.33 for U.S. tax reform related matters. Results in 2017 included a net benefit of $0.17 from U.S. tax reform related matters.

	12	KIMBERLY-CLARK CORPORATION - 2018 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 2018 results of operations.

Consolidated

Selected Financial Results	Year Ended December 31
	2018				2017				Change 2018 vs. 2017			2016				Change 2017 vs. 2016
Net Sales:
North America	$	9,532			$	9,437			+1	%		$	9,592			-2	%
Outside North America	9,256				9,228				—			9,002				+3	%
Intergeographic sales	(302		)		(317		)		-5	%		(307		)		+3	%
Total Net Sales	18,486				18,348				+1	%		18,287				—
Operating Profit:
North America	2,215				2,331				-5	%		2,372				-2	%
Outside North America	1,127				1,299				-13	%		1,264				+3	%
Corporate & Other(a)	(1,112		)		(245		)		N.M.			(245		)		N.M.
Other (income) and expense, net(a)	1				27				-96	%		8				+238	%
Total Operating Profit	2,229				3,358				-34	%		3,383				-1	%
Provision for income taxes	(471		)		(776		)		-39	%		(922		)		-16	%
Share of net income of equity companies	103				104				-1	%		132				-21	%
Net Income Attributable to Kimberly-Clark Corporation	1,410				2,278				-38	%		2,166				+5	%
Diluted Earnings per Share	4.03				6.40				-37	%		5.99				+7	%

(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, 2018
		As Reported				2018 Global Restructuring Program				U.S. Tax Reform Related Matters				As Adjusted Non-GAAP
Cost of products sold		$	12,889			$	541			$	—			$	12,348
Gross Profit		5,597				(541		)		—				6,138
Marketing, research and general expenses		3,367				380				—				2,987
Other (income) and expense, net		1				(12		)		—				13
Operating Profit		2,229				(909		)		—				3,138
Nonoperating expense		(163		)		(127		)		—				(36		)
Provision for income taxes		(471		)		243				(117		)		(597		)
Effective tax rate		26.0		%		—				—				21.0		%
Share of net income of equity companies		103				(1		)		—				104
Net income attributable to noncontrolling interests		(35		)		11				—				(46		)
Net Income Attributable to Kimberly-Clark Corporation		1,410				(783		)		(117		)		2,310
Diluted Earnings per Share(a)		4.03				(2.24		)		(0.33		)		6.61

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

	13	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

		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		3,358				(24		)		3,382
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

		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		$	11,596			$	6			$	—			$	11,590
Marketing, research and general expenses		3,300				32				—				3,268
Other (income) and expense, net		8				(3		)		(11		)		22
Operating Profit		3,383				(35		)		11				3,407
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

Analysis of Consolidated Results

Net Sales		Percent Change						Adjusted Operating Profit		Percent Change
		2018 vs. 2017			2017 vs. 2016					2018 vs. 2017			2017 vs. 2016
Volume		—			1			Volume		1			1
Net Price		—			(1	)		Net Price		3			(7	)
Mix/Other		1			—			Input Costs		(24	)		(10	)
Currency		(1	)		1			Cost Savings(c)		15			13
Total(a)		1			—			Currency Translation		—			1
								Other(d)		(2	)		1
Organic(b)		1			—			Total		(7	)		(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)	Combined benefits of the FORCE program and 2018 Global Restructuring Program.

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

2018 vs. 2017

Net sales of $18.5 billion increased 1 percent compared to the year-ago period. Organic sales increased more than 1 percent, as changes in product mix, net selling prices and sales volumes were all up slightly. Changes in foreign currency exchange rates decreased sales by approximately 1 percent. Operating profit was $2,229 in 2018 and $3,358 in 2017. Adjusted operating profit was $3,138 in 2018 and $3,382 in 2017. Results in 2018 were impacted by $795 of higher input costs, driven by $460 in pulp and $220 in other raw materials, along with unfavorable currency effects. Results benefited from organic sales growth, $375 of FORCE cost savings and $135 of cost savings from the 2018 Global Restructuring Program, and lower general and administrative costs.

	14	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

The effective tax rate of 26 percent in 2018 was essentially even compared to the rate in 2017. The rate in 2018 included a net charge of $117 related to U.S. tax reform related matters including finalization of provisional amounts related to the transition tax, remeasurement of deferred taxes, and our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances, and to new guidance issued during 2018 impacting the transition tax and other actions taken in anticipation of the Tax Act. The 2017 provision for income taxes included a net benefit of $85 related to such matters. See additional details in Item 8, Note 12 to the consolidated financial statements. The adjusted effective tax rate was 21 percent in 2018 compared to 28.6 percent in 2017. The adjusted effective tax rate in 2018 benefited from U.S. tax reform, along with planning initiatives and resolution of certain tax matters.

Our share of net income of equity companies was $103 in 2018 and $104 in 2017. Kimberly-Clark de Mexico, S.A.B. de C.V. ("KCM") results in 2018 benefited from organic sales growth and cost savings but were negatively impacted by higher input costs and unfavorable currency effects.

Diluted earnings per share were $4.03 in 2018 and $6.40 in 2017. Adjusted earnings per share were $6.61 in 2018 and $6.23 in 2017, driven by higher earnings, including the benefit of a lower effective tax rate, along with a lower share count.

2017 vs. 2016

Net sales of $18.3 billion were up slightly compared to the year-ago period. Favorable foreign currency exchange 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 $3,358 in 2017 and $3,383 in 2016. Adjusted operating profit was $3,382 in 2017 and $3,407 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 12 to the consolidated financial statements. The adjusted effective tax 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.

	15	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

Business Segments

Personal Care

		2018				2017				2016						2018				2017				2016
Net Sales		$	9,037			$	9,078			$	9,046			Operating Profit		$	1,833			$	1,933			$	1,884

Net Sales		Percent Change						Operating Profit		Percent Change
		2018 vs. 2017			2017 vs. 2016					2018 vs. 2017			2017 vs. 2016
Volume		1			1			Volume		2			2
Net Price		(1	)		(2	)		Net Price		(3	)		(9	)
Mix/Other		1			1			Input Costs		(14	)		(7	)
Currency		(2	)		1			Cost Savings(c)		14			13
Total(a)		—			—			Currency Translation		(1	)		1
								Other(d)		(3	)		3
Organic(b)		1			(1	)		Total		(5	)		3

(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)	Combined benefits of the FORCE program and 2018 Global Restructuring Program.

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

2018 vs. 2017

Net sales of $9.0 billion in 2018 were down slightly compared to 2017. Unfavorable changes in foreign currency exchange rates decreased sales by 2 percent. Sales volumes and changes in product mix each increased sales by 1 percent while net selling prices were down 1 percent. Operating profit of $1,833 decreased 5 percent. The comparison was negatively impacted by input cost inflation and unfavorable currency effects which were partially offset by cost savings and organic sales growth.

Net sales in North America increased 1 percent. Sales volumes increased 3 percent, and changes in net selling prices decreased sales by 2 percent. Volumes increased mid-single digits in the infant and child care mega-category, as child care volumes rose high-single digits, including benefits from innovations, and Huggies diaper volumes were up low-single digits. Adult care volumes were up low-single digits, led by the Depend brand.

Net sales in D&E Markets decreased 3 percent. Changes in foreign currency exchange rates decreased sales by 6 percent, primarily in Latin America. Changes in product mix and net selling prices increased sales by 2 percent and 1 percent, respectively, while sales volume decreased slightly. The improvement in product mix was primarily in China, and the higher net selling prices were primarily in Latin America, partially offset by decreases in China. Volume decreases occurred primarily in China and Argentina, mostly offset by increases in Eastern Europe, Brazil and ASEAN.

Net sales in Developed Markets outside North America were even year-on-year. Favorable changes in foreign currency exchange rates, primarily in South Korea, and changes in product mix increased sales by 2 percent and 1 percent, respectively. Changes in net selling prices decreased sales by 2 percent, and sales volumes declined 1 percent.

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 $1,933 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 sales 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

	16	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

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 D&E 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.

Consumer Tissue

		2018				2017				2016						2018				2017				2016
Net Sales		$	6,015			$	5,932			$	5,967			Operating Profit		$	875			$	1,052			$	1,136

Net Sales		Percent Change						Operating Profit		Percent Change
		2018 vs. 2017			2017 vs. 2016					2018 vs. 2017			2017 vs. 2016
Volume		(1	)		—			Volume		(3	)		(2	)
Net Price		2			(1	)		Net Price		12			(5	)
Mix/Other		—			—			Input Costs		(37	)		(13	)
Currency		—			1			Cost Savings(c)		15			11
Total(a)		1			(1	)		Currency Translation		1			—
								Other(d)		(5	)		2
Organic(b)		1			(1	)		Total		(17	)		(7	)

(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)	Combined benefits of the FORCE program and 2018 Global Restructuring Program.

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

2018 vs. 2017

Net sales of $6.0 billion increased 1 percent compared to 2017. Changes in net selling prices increased sales by 2 percent while sales volumes decreased 1 percent. Operating profit of $875 decreased 17 percent. The comparison was impacted by input cost inflation and lower volumes, partially offset by increased net selling prices and cost savings.

Net sales in North America were even year-on-year. Changes in net selling prices increased sales by 2 percent while sales volumes decreased by 2 percent. The increased net selling prices reflect strategies executed during 2018 to improve net realized revenue.

Net sales in D&E Markets decreased 1 percent. Changes in foreign currency exchange rates decreased sales by 3 percent, primarily in Latin America. Changes in net selling prices increased sales by 2 percent, led by improvements in Latin America. Changes in product mix increased sales by 1 percent, and sales volumes decreased by 1 percent, primarily in Brazil.

Net sales in Developed Markets outside North America increased 7 percent. Changes in foreign currency exchange rates and net selling prices each increased sales by 3 percent, both driven by Western and Central Europe. Sales volumes increased by 2 percent, primarily in South Korea, partly offset by unfavorable changes in product mix of 1 percent.

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 exchange rates. Operating profit of $1,052 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.

	17	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

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. Volumes were down in bathroom tissue and facial tissue, and up in paper towels.

Net sales in D&E 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.

K-C Professional

		2018				2017				2016						2018				2017				2016
Net Sales		$	3,382			$	3,297			$	3,235			Operating Profit		$	634			$	645			$	616

Net Sales		Percent Change					Operating Profit		Percent Change
		2018 vs. 2017		2017 vs. 2016					2018 vs. 2017			2017 vs. 2016
Volume		1		1			Volume		3			3
Net Price		1		(1	)		Net Price		3			(3	)
Mix/Other		1		1			Input Costs		(21	)		(12	)
Currency		—		1			Cost Savings(c)		11			12
Total(a)		3		2			Currency Translation		—			1
							Other(d)		2			4
Organic(b)		3		1			Total		(2	)		5

(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)	Combined benefits of the FORCE program and 2018 Global Restructuring Program.

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

2018 vs. 2017

Net sales of $3.4 billion increased 3 percent compared to 2017, as changes in sales volumes, net selling prices and product mix each benefited sales by 1 percent. Operating profit of $634 decreased 2 percent. The comparison was impacted by input cost inflation which was partially offset by cost savings, organic sales growth, and lower marketing, research and general spending.

Net sales in North America increased about 3 percent. Sales volumes increased by 2 percent with higher volumes in all major product categories. The combined impact of changes in product mix and net selling prices increased sales by about 1 percent.

Net sales in D&E Markets increased about 1 percent as sales volumes increased 3 percent, led by increases in Asia-Pacific, and changes in net selling prices increased sales by 1 percent. Unfavorable changes in foreign currency exchange rates decreased sales by 3 percent, primarily driven by Latin America, and changes in product mix decreased sales about 1 percent.

Net sales in Developed Markets outside North America increased 3 percent as favorable changes in foreign currency exchange rates increased sales by 3 percent. Changes in net selling prices and product mix each increased sales by 1 percent, while sales volumes decreased by 2 percent. The favorable changes in foreign currency exchange rates and decrease in volumes were both primarily in Western and Central Europe.

2017 vs. 2016

Net sales of $3.3 billion in 2017 increased 2 percent compared to 2016, including the benefit of favorable currency exchange rates of 1 percent. The combined impact from sales volume growth, changes in net selling prices, and changes in product mix increased sales by 1 percent. Operating profit of $645 increased 5 percent. The comparison benefited from cost savings and lower marketing, research and general spending, partially offset by input cost inflation.

	18	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

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 D&E Markets increased 5 percent as favorable currency exchange 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 exchange rates benefited sales slightly.

2018 Global Restructuring Program

In January 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, asset write-offs and pension settlement and curtailment charges. 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 2019 are expected to be $600 to $750 pre-tax ($470 to $570 after tax).

We generated savings of $135 in 2018 and expect to generate savings of $100 to $125 in 2019.

Unaudited Quarterly Data

	2018(a)																2017
	Fourth				Third				Second				First				Fourth				Third				Second				First
Net Sales	$	4,569			$	4,582			$	4,604			$	4,731			$	4,603			$	4,665			$	4,576			$	4,504
Gross Profit	1,402				1,416				1,455				1,324				1,608				1,667				1,652				1,660
Operating Profit	639				669				674				247				828				868				814				848
Net Income	421				462				465				97				625				579				540				575
Net Income Attributable to Kimberly-Clark Corporation	411				451				455				93				617				567				531				563
Per Share Basis-Diluted	1.18				1.29				1.30				0.26				1.75				1.60				1.49				1.57

(a)	Quarterly results in 2018 were impacted by charges related to the 2018 Global Restructuring Program. See Item 8, Note 2 to the consolidated financial statements for details.

Liquidity and Capital Resources

Cash Provided by Operations

Cash provided by operations was $3.0 billion in 2018 compared to $2.9 billion in 2017. The increase was driven by improved working capital and lower tax payments, mostly offset by lower earnings, payments related to the 2018 Global Restructuring Program and higher pension contributions. Cash provided by operations was $3.2 billion in 2016. The decrease in 2017 compared to 2016 was driven by higher tax payments.

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Obligations

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

	Total				2019				2020				2021				2022				2023				2024+
Long-term debt	$	6,973			$	716			$	758			$	256			$	304			$	464			$	4,475
Interest payments on long-term debt	3,063				222				209				191				183				177				2,081
Operating leases	538				160				123				85				57				41				72
Unconditional purchase obligations	1,238				841				161				37				38				38				123
Open purchase orders	2,096				1,763				291				31				6				3				2
Total contractual obligations	$	13,908			$	3,702			$	1,542			$	600			$	588			$	723			$	6,753

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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 $25 to these plans in 2019.

•	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 $60 through 2028.

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

Investing

Our capital spending was $0.9 billion in 2018 and $0.8 billion 2017. We expect capital spending to be approximately $1.1 billion to $1.3 billion in 2019, including incremental spending associated with 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 5 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 $495 as of December 31, 2018 (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 2018 was $583 and for the twelve months ended December 31, 2018 was $831. 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, 2018, total debt was $7.5 billion compared to $7.4 billion at December 31, 2017.

In June 2018, we entered into a $2.0 billion revolving credit facility which expires in June 2023 and a $500 revolving credit facility which expires in June 2019. These facilities, currently unused, replaced a similar $2.0 billion facility, support 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 2018. The Board of Directors approved a dividend increase of 3 percent for 2019. We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs.

	20	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

During 2018, we repurchased 7.3 million shares of our common stock at a cost of $800 through a broker in the open market. We are targeting full-year 2019 share repurchases between $600 and $900, subject to market conditions.

Our subsidiaries in Argentina (“K-C Argentina”) began accounting for their operations as highly inflationary effective July 1, 2018, as required by GAAP. Under highly inflationary accounting, K-C Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other (income) and expense, net and was not material. As of December 31, 2018, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were less than 2 percent of our consolidated net sales in 2018, 2017 and 2016.

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 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. 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

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 7 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:

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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, 2018, 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, and whether such

	21	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

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 percent, the impact on annual pension expense would not be material in 2019.

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Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 2018 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 percent, the increase in annual pension expense would not be material in 2019, and the December 31, 2018 pension liability would increase by about $115.

•	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 $90 in 2019, including incremental charges resulting from 2018 Global Restructuring Program actions. Pension expense beyond 2019 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:

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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 2019 other postretirement benefit expense and the increase in the December 31, 2018 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 12 to the consolidated financial statements.

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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.

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Undistributed earnings. As of December 31, 2018, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $8.4 billion. Earnings of $5.6 billion were previously subject to tax, primarily due to the one-time transition tax on foreign earnings required by the Tax Act. Any additional taxes due with respect to such previously-taxed earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes. Deferred taxes have been recorded for foreign and U.S. state income taxes on $0.7 billion of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute the remaining $4.9 billion of previously-taxed

	22	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

foreign earnings and therefore have not recorded deferred taxes for foreign and U.S. state income taxes on such earnings. While the transition tax resulted in a reduction of the excess of the amount for financial reporting over the tax basis in our foreign subsidiaries, any remaining amount of financial reporting over tax basis after such reduction could be subject to additional taxes, if repatriated. However, we consider any excess to be indefinitely reinvested. At this time, the determination of deferred tax liabilities on the amount of financial reporting over tax basis or the $4.9 billion of previously-taxed foreign earnings is not practicable.

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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 may be affected by changing interpretations of laws, rulings by tax authorities or the expiration of the statute of limitations.

Legal Matters

See Item 8, Note 10 to the consolidated financial statements for information on legal matters.

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 2019, we plan to focus on our strategies for long-term success, including growing our brands, leveraging our financial discipline and allocating capital in value-creating ways. In 2019, we expect earnings per share to be $4.85 to $5.35. Adjusted earnings per share are expected to be $6.50 to $6.70, which excludes 2018 Global Restructuring Program charges equivalent to $1.35 to $1.65. Our adjusted earnings per share guidance is based on the assumptions described below:

•	We expect net sales to decrease 1 to 2 percent. We anticipate changes in foreign currency exchange rates to have an unfavorable impact of 3 to 4 percent. Exited businesses in conjunction with the 2018 Global Restructuring Program are expected to reduce sales slightly, mostly in K-C Professional.

•	We expect organic sales to increase approximately 2 percent, driven by higher net selling prices of at least 3 percent.

•	We expect adjusted operating profit growth of 1 to 4 percent.

•	We plan to achieve cost savings of $400 to $450, including $300 to $325 from our FORCE program and $100 to $125 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 foreign currency translation effects to reduce operating profit by 2 to 3 percent and transaction effects to also negatively impact the comparison.

•	We expect interest expense to increase somewhat year-on-year.

•	We expect an adjusted effective tax rate of 23 to 25 percent compared to 21 percent in 2018. At the mid-point, the higher rate is equivalent to an approximate 3 ½ percent reduction in adjusted earnings per share.

•	We expect net income from equity companies to be similar 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, including the impact in Argentina, 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

	23	KIMBERLY-CLARK CORPORATION - 2018 Annual Report

as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.

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, our ability to maintain key customer relationships 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.