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 2019 results to 2018. For a discussion that compares our 2018 results to 2017, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2018 Annual Report on Form 10-K. 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 exchange rates and exited businesses 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 2019 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

•	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:

•	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.

•	Property Sale Gain - In the fourth quarter of 2019, we recognized a gain on the sale of property associated with a former manufacturing facility that was closed in 2012 as part of a past restructuring.

•	U.S. Tax Reform Related Matters - In 2018 we recognized a net charge associated with U.S. tax reform related matters. See Item 8, Note 11 to the consolidated financial statements for details.

	11	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

Overview of Business

We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 32 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:

•	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.

Overview of 2019 Results

•	Net sales of $18.5 billion were even with the year-ago period. Organic sales increased 4 percent. Changes in foreign currency exchange rates reduced sales by 3 percent.

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

•	Outside North America, organic sales rose 6 percent in D&E Markets and 1 percent in Developed Markets.

•	Operating Profit and Net Income Attributable to Kimberly-Clark were $2,991 and $2,157 in 2019, respectively.

•

Diluted earnings per share were $6.24 in 2019 compared to $4.03 in 2018. Results in 2019 include net charges of $0.72 related to the 2018 Global Restructuring Program and a net gain of $0.07 related to the sale of property associated with a former manufacturing facility that was closed as part of a past restructuring. Results in 2018 include net charges of $2.24 related to the 2018 Global Restructuring Program and a net charge of $0.33 for U.S. tax reform related matters.

•	We continue to focus on generating cash flow and allocating capital to shareholders. Cash provided by operations was $2.7 billion in 2019. We raised our dividend in 2019 by 3 percent, the 47th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2019 amounted to $2.2 billion.

In 2020, 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.

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.

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 2019 results of operations.

	12	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

Consolidated

Selected Financial Results	Year Ended December 31
	2019				2018				Change 2019 vs. 2018
Net Sales:
North America	$	9,735			$	9,532			+2	%
Outside North America	8,981				9,256				-3	%
Intergeographic sales	(266		)		(302		)		-12	%
Total Net Sales	18,450				18,486				—
Operating Profit:
North America	2,441				2,215				+10	%
Outside North America	1,127				1,127				—
Corporate & Other(a)	(787		)		(1,112		)		N.M.
Other (income) and expense, net(a)	210				1				—
Total Operating Profit	2,991				2,229				+34	%
Provision for income taxes	(576		)		(471		)		+22	%
Share of net income of equity companies	123				103				+19	%
Net Income Attributable to Kimberly-Clark Corporation	2,157				1,410				+53	%
Diluted Earnings per Share	6.24				4.03				+55	%

(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, 2019
		As Reported				2018 Global Restructuring Program				Property Sale Gain				As Adjusted Non-GAAP
Cost of products sold		$	12,415			$	416			$	—			$	11,999
Gross Profit		6,035				(416		)		—				6,451
Marketing, research and general expenses		3,254				99				—				3,155
Other (income) and expense, net		(210		)		(194		)		(31		)		15
Operating Profit		2,991				(321		)		31				3,281
Nonoperating expense		(91		)		(45		)		—				(46		)
Provision for income taxes		(576		)		118				(7		)		(687		)
Effective tax rate		21.7		%		—				—				23.0		%
Share of net income of equity companies		123				(2		)		—				125
Net income attributable to noncontrolling interests		(40		)		2				—				(42		)
Net Income Attributable to Kimberly-Clark Corporation		2,157				(248		)		24				2,381
Diluted Earnings per Share(a)		6.24				(0.72		)		0.07				6.89

	13	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

		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" may not equal "As Reported" plus "Adjustments" as a result of rounding.

Analysis of Consolidated Results

Net Sales		Percent Change			Adjusted Operating Profit		Percent Change
		2019 vs. 2018					2019 vs. 2018
Volume		(1	)		Volume		(1	)
Net Price		4			Net Price		21
Mix/Other		1			Input Costs		(5	)
Currency		(3	)		Cost Savings(c)		14
Total(a)		—			Currency Translation		(2	)
					Other(d)		(22	)
Organic(b)		4			Total		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 (Focused On Reducing Costs Everywhere) 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.

Net sales of $18.5 billion were even with the year-ago period. Operating profit was $2,991 in 2019 and $2,229 in 2018. Adjusted operating profit was $3,281 in 2019, up 5 percent compared to $3,138 in 2018. Results benefited from organic sales growth, $260 of FORCE cost savings and $165 of cost savings from the 2018 Global Restructuring Program. The comparison was impacted by unfavorable currency effects, $145 of higher input costs, other manufacturing cost increases, increased advertising spending and higher selling, general and administrative costs.

Other (income) and expense, net of $210 in 2019 primarily reflected gains on the sales of manufacturing facilities and associated real estate related to the 2018 Global Restructuring Program and property associated with a former manufacturing facility that was closed as part of a past restructuring. Adjusted other (income) and expense, net was $15 and $13 of expense in 2019 and 2018, respectively.

The effective tax rate of 21.7 percent in 2019 decreased compared to the effective tax rate of 26.0 percent in 2018. The rate in 2019 included a net benefit of $47 related to a nonrecurring capital loss from a legal entity restructuring. The rate in 2018 included a net charge of $117 related to U.S. tax reform related matters. See additional details in Item 8, Note 11 to the consolidated financial

	14	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

statements. The adjusted effective tax rate was 23.0 percent in 2019 compared to 21.0 percent in 2018. The adjusted rate in 2018 benefited from planning initiatives and resolution of certain tax matters.

Our share of net income of equity companies was $123 in 2019 and $103 in 2018. Kimberly-Clark de Mexico, S.A.B. de C.V. ("KCM") results in 2019 benefited from organic sales growth and cost savings but were negatively impacted by higher input costs.

Diluted earnings per share were $6.24 in 2019 and $4.03 in 2018. Adjusted earnings per share of $6.89 in 2019 increased 4 percent compared to $6.61 in 2018. The increase was driven by higher adjusted operating profit, increased net income from equity companies and a lower share count, partially offset by a higher adjusted effective tax rate.

Business Segments

Personal Care

		2019				2018						2019				2018
Net Sales		$	9,108			$	9,037			Operating Profit		$	1,904			$	1,833

Net Sales		Percent Change			Operating Profit		Percent Change
		2019 vs. 2018					2019 vs. 2018
Volume		1			Volume		3
Net Price		3			Net Price		15
Mix/Other		1			Input Costs		(6	)
Currency		(4	)		Cost Savings(c)		12
Total(a)		1			Currency Translation		(3	)
					Other(d)		(17	)
Organic(b)		5			Total		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)	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.

Net sales in North America increased 3 percent. Higher sales volumes and changes in net selling prices and product mix each increased sales by 1 percent. Volume growth was primarily driven by an increase in sales of adult care products, reflecting product innovations, increased brand investments and category growth. The improvements in net selling prices and product mix were driven by baby and child care.

Net sales in D&E Markets decreased 1 percent. Changes in foreign currency exchange rates decreased sales by 9 percent, primarily in Latin America and China. Changes in net selling prices and product mix increased sales by 7 percent and 2 percent, respectively. The higher net selling prices were led by Latin America, China and Eastern Europe. The improvements in product mix were primarily in China.

Net sales in Developed Markets outside North America decreased 5 percent. Changes in foreign currency exchange rates decreased sales by 6 percent and changes in net selling prices decreased sales by 1 percent. Changes in product mix and higher sales volumes each increased sales by 1 percent.

Operating profit of $1,904 increased 4 percent. The comparison was positively impacted by organic sales growth and cost savings, partially offset by input cost inflation, unfavorable currency effects and higher advertising spending.

	15	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

Consumer Tissue

		2019				2018						2019				2018
Net Sales		$	5,993			$	6,015			Operating Profit		$	1,007			$	875

Net Sales		Percent Change			Operating Profit		Percent Change
		2019 vs. 2018					2019 vs. 2018
Volume		(3	)		Volume		(7	)
Net Price		5			Net Price		33
Mix/Other		—			Input Costs		(3	)
Currency		(3	)		Cost Savings(c)		14
Total(a)		—			Currency Translation		(1	)
					Other(d)		(21	)
Organic(b)		2			Total		15

(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.

Net sales in North America increased 2 percent. Organic sales increased 2 percent with improvement in all three major product categories of bathroom tissue, facial tissue and paper towels. Changes in net selling prices increased sales by 7 percent, reflecting disciplined execution of price increases, while sales volumes decreased 5 percent.

Net sales in D&E Markets decreased 2 percent. Changes in foreign currency exchange rates decreased sales by 5 percent, primarily in Latin America. Sales volumes decreased by 1 percent. Changes in net selling prices increased sales by 3 percent, led by improvements in Latin America. Changes in product mix increased sales by 1 percent.

Net sales in Developed Markets outside North America decreased 4 percent. Changes in foreign currency exchange rates decreased sales by 6 percent and lower sales volumes decreased sales by 1 percent. Changes in net selling prices increased sales by 2 percent. Each of the changes was driven by Western and Central Europe.

Operating profit of $1,007 increased by 15 percent. Results benefited from higher net selling prices and cost savings. The comparison was impacted by other manufacturing cost increases, lower volumes, unfavorable currency effects, higher input costs and increased selling, general and administrative costs.

	16	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

K-C Professional

		2019				2018						2019				2018
Net Sales		$	3,292			$	3,382			Operating Profit		$	657			$	634

Net Sales		Percent Change			Operating Profit		Percent Change
		2019 vs. 2018					2019 vs. 2018
Volume		(2	)		Volume		(4	)
Net Price		3			Net Price		15
Mix/Other		1			Input Costs		(2	)
Exited Businesses(e)		(2	)		Cost Savings(c)		13
Currency		(3	)		Currency Translation		(2	)
Total(a)		(3	)		Other(d)		(16	)
Organic(b)		2			Total		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)	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.

(e)	Exited businesses in conjunction with the 2018 Global Restructuring Program.

Net sales in North America increased 1 percent. Changes in net selling prices and product mix increased sales by 3 percent and 1 percent, respectively, while business exits in conjunction with the 2018 Global Restructuring Program reduced sales more than 1 percent. Sales volumes decreased 1 percent.

Net sales in D&E Markets decreased 4 percent. Changes in foreign currency exchange rates decreased sales by 5 percent, primarily in Latin America. Sales volumes decreased 3 percent. Changes in net selling prices increased sales by 3 percent led by improvements in Latin America. Changes in product mix increased sales by 1 percent.

Net sales in Developed Markets outside North America decreased 6 percent. Changes in foreign currency exchange rates decreased sales by 6 percent, and lower sales volumes and business exits decreased sales by 5 percent and 1 percent, respectively. Changes in product mix and net selling prices increased sales by 3 percent and 2 percent, respectively. Each of the changes was driven by Western and Central Europe.

Operating profit of $657 increased 4 percent. The comparison benefited from improved net selling prices and cost savings, partially offset by increased other manufacturing costs, lower volumes and unfavorable currency effects.

2018 Global Restructuring Program

Annual pre-tax savings from the 2018 Global Restructuring Program are expected to be $500 to $550 by 2021. Savings for 2019 were $165, bringing cumulative savings to $300.

To implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2020. See Item 8, Note 2 to the consolidated financial statements for additional information.

	17	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

Unaudited Quarterly Data

	2019**(a)**																2018**(a)**
	Fourth				Third				Second				First				Fourth				Third				Second				First
Net Sales	$	4,583			$	4,640			$	4,594			$	4,633			$	4,569			$	4,582			$	4,604			$	4,731
Gross Profit	1,566				1,555				1,486				1,428				1,402				1,416				1,455				1,324
Operating Profit	751				915				670				655				639				669				674				247
Net Income	556				680				495				466				421				462				465				97
Net Income Attributable to Kimberly-Clark Corporation	547				671				485				454				411				451				455				93
Per Share Basis-Diluted	1.59				1.94				1.40				1.31				1.18				1.29				1.30				0.26

(a)	Quarterly results in 2019 and 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 $2.7 billion in 2019 compared to $3.0 billion in 2018. The decrease was driven by increased working capital and tax payments, partially offset by higher earnings and lower pension contributions.

Obligations

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

	Total				2020				2021				2022				2023				2024				2025+
Long-term debt	$	6,985			$	761			$	258			$	310			$	468			$	552			$	4,636
Interest payments on long-term debt	3,051				232				214				206				200				193				2,006
Operating lease liabilities	454				145				102				72				51				32				52
Unconditional purchase obligations	1,579				1,249				83				57				50				39				101
Open purchase orders	2,268				2,213				41				11				2				1				—
Total contractual obligations	$	14,337			$	4,600			$	698			$	656			$	771			$	817			$	6,795

•

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 $50 to these plans in 2020.

•	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 2029.

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

	18	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

Investing

Our capital spending was $1.2 billion in 2019 and $0.9 billion 2018, reflecting incremental spending in 2019 related to the 2018 Global Restructuring Program. Proceeds from dispositions of property in 2019 of $242 primarily reflects the proceeds from the sales of manufacturing facilities and associated real estate related to the 2018 Global Restructuring Program and property associated with a former manufacturing facility that was closed as part of a past restructuring. We expect capital spending to be approximately $1.15 billion to $1.35 billion in 2020, including significant 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 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 $775 as of December 31, 2019 (included in debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the twelve months ended December 31, 2019 was $1.0 billion. 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, 2019, total debt was $7.7 billion compared to $7.5 billion at December 31, 2018.

In February 2020, we issued $500 aggregate principal amount of 2.875% notes due February 7, 2050. Proceeds from the offering were used for general corporate purposes including the repayment of a portion of our commercial paper indebtedness.

We maintain a $2.0 billion revolving credit facility which expires in June 2023 and a $750 revolving credit facility which expires in June 2020. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.

We paid $1.4 billion in dividends in 2019. The Board of Directors approved a dividend increase of 3.9 percent for 2020. We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During 2019, we repurchased 6.2 million shares of our common stock at a cost of $800 through a broker in the open market. We are targeting full-year 2020 share repurchases between $700 and $900, subject to market conditions.

We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, payments for our 2018 Global Restructuring Program, capital spending, pension contributions, dividends and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.

	19	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

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.

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 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 rate used to calculate the obligations:

•

Long-term rate of return on plan assets. The expected long-term rate of return is evaluated on an annual basis. In setting these assumptions, we consider a number of factors including projected future returns by asset class relative to the target asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered appropriate.

As of December 31, 2019, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.2 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, and whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required*.* If the expected long-term rate of return on assets for the Principal Plans were lowered by 0.25 percent, the impact on annual pension expense would not be material in 2020.

•

Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 2019 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 2020, and the December 31, 2019 pension liability would increase by about $130.

•	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 $105 in 2020, including incremental charges resulting from 2018 Global Restructuring Program actions. Pension expense beyond 2020 will depend on future investment performance,

	20	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

our contributions to the pension trusts, changes in discount rates and various other factors related to the covered participants in the plans.

Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. Changes in significant assumptions could affect the consolidated expense and benefit obligations, particularly the discount rate used to calculate the obligations and the health care cost trend rate:

•

Discount rate. The determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefit section above, and the methodology for each country is the same as the methodology used to determine the discount rate for that country's pension obligation. If the discount rate assumptions for these plans were reduced by 0.25 percent, the impact to 2020 other postretirement benefit expense and the increase in the December 31, 2019 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 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. As of December 31, 2019, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $7.7 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 Cuts and Jobs 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 on $0.9 billion of earnings, most of which were previously taxed for U.S. federal income tax purposes, of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute the remaining $4.7 billion of previously taxed 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 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. The determination of deferred tax liabilities on the amount of financial reporting over tax basis or the $4.7 billion of previously taxed foreign earnings is not practicable.

•

Uncertain tax positions. We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate. Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities 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 9 to the consolidated financial statements for information on legal matters.

	21	KIMBERLY-CLARK CORPORATION - 2019 Annual Report

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.

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 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.