Item 1. Financial Statements

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(Unaudited)

						Three Months Ended September 30												Nine Months Ended September 30
(Millions of dollars, except per share amounts)						2021						2020						2021						2020
Net Sales						$	5,010					$	4,683					$	14,475					$	14,304
Cost of products sold						3,527						3,093						9,923						9,146
Gross Profit						1,483						1,590						4,552						5,158
Marketing, research and general expenses						819						919						2,488						2,636
Other (income) and expense, net						7						5						24						27
Operating Profit						657						666						2,040						2,495
Nonoperating expense						(10)						(40)						(71)						(57)
Interest income						1						2						4						6
Interest expense						(64)						(62)						(192)						(188)
Income Before Income Taxes and Equity Interests						584						566						1,781						2,256
Provision for income taxes						(126)						(114)						(386)						(510)
Income Before Equity Interests						458						452						1,395						1,746
Share of net income of equity companies						21						31						88						104
Net Income						479						483						1,483						1,850
Net income attributable to noncontrolling interests						(10)						(11)						(26)						(37)
Net Income Attributable to Kimberly-Clark Corporation						$	469					$	472					$	1,457					$	1,813
Per Share Basis
Net Income Attributable to Kimberly-Clark Corporation
Basic						$	1.39					$	1.38					$	4.32					$	5.32
Diluted						$	1.39					$	1.38					$	4.31					$	5.30

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

						Three Months Ended September 30												Nine Months Ended September 30
(Millions of dollars)						2021						2020						2021						2020
Net Income						$	479					$	483					$	1,483					$	1,850
Other Comprehensive Income (Loss), Net of Tax
Unrealized currency translation adjustments						(151)						38						(288)						(236)
Employee postretirement benefits						16						—						45						39
Other						35						(3)						93						5
Total Other Comprehensive Income (Loss), Net of Tax						(100)						35						(150)						(192)
Comprehensive Income						379						518						1,333						1,658
Comprehensive (income) loss attributable to noncontrolling interests						1						(16)						(8)						(34)
Comprehensive Income Attributable to Kimberly-Clark Corporation						$	380					$	502					$	1,325					$	1,624

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(2021 Data is Unaudited)

(Millions of dollars)						September 30, 2021						December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents						$	286					$	303
Accounts receivable, net						2,399						2,235
Inventories						2,098						1,903
Other current assets						843						733
Total Current Assets						5,626						5,174
Property, Plant and Equipment, Net						7,964						8,042
Investments in Equity Companies						340						300
Goodwill						1,796						1,895
Other Intangible Assets, Net						810						832
Other Assets						1,239						1,280
TOTAL ASSETS						$	17,775					$	17,523
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year						$	1,387					$	486
Trade accounts payable						3,519						3,336
Accrued expenses and other current liabilities						1,972						2,262
Dividends payable						380						359
Total Current Liabilities						7,258						6,443
Long-Term Debt						7,555						7,878
Noncurrent Employee Benefits						869						864
Deferred Income Taxes						701						723
Other Liabilities						657						718
Redeemable Preferred Securities of Subsidiaries						28						28
Stockholders' Equity
Kimberly-Clark Corporation
Preferred stock - no par value - authorized 20.0 million shares, none issued						—						—
Common stock - $1.25 par value - authorized 1.2 billion shares; issued 378.6 million shares at September 30, 2021 and December 31, 2020						473						473
Additional paid-in capital						614						657
Common stock held in treasury, at cost - 41.9 and 39.9 million shares at September 30, 2021 and December 31, 2020, respectively						(5,191)						(4,899)
Retained earnings						7,883						7,567
Accumulated other comprehensive income (loss)						(3,305)						(3,172)
Total Kimberly-Clark Corporation Stockholders' Equity						474						626
Noncontrolling Interests						233						243
Total Stockholders' Equity						707						869
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY						$	17,775					$	17,523

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

						Three Months Ended September 30, 2021
(Millions of dollars, shares in thousands, except per share amounts)						Common Stock Issued															Additional Paid-in Capital						Treasury Stock																		Retained Earnings						Accumulated Other Comprehensive Income (Loss)									Non-controlling Interests						Total Stockholders' Equity
			Shares						Amount												Shares						Amount
Balance at June 30, 2021						378,597						$	473								$	627					41,661						$	(5,159)											$	7,798					$	(3,215)								$	234					$	758
Net income in stockholders' equity, excludes redeemable interests' share						—						—									—						—						—												469						—									10						479
Other comprehensive income, net of tax, excludes redeemable interests' share						—						—									—						—						—												—						(89)									(11)						(100)
Stock-based awards exercised or vested						—						—									(1)						(237)						26												—						—									—						25
Shares repurchased						—						—									—						429						(58)												—						—									—						(58)
Recognition of stock-based compensation						—						—									(13)						—						—												—						—									—						(13)
Dividends declared ($1.14 per share)						—						—									—						—						—												(384)						—									—						(384)
Other						—						—									1						—						—												—						(1)									—						—
Balance at September 30, 2021						378,597						$	473								$	614					41,853						$	(5,191)											$	7,883					$	(3,305)								$	233					$	707

						Nine Months Ended September 30, 2021
(Millions of dollars, shares in thousands, except per share amounts)						Common Stock Issued															Additional Paid-in Capital						Treasury Stock																		Retained Earnings						Accumulated Other Comprehensive Income (Loss)									Non-controlling Interests						Total Stockholders' Equity
			Shares						Amount												Shares						Amount
Balance at December 31, 2020						378,597						$	473								$	657					39,873						$	(4,899)											$	7,567					$	(3,172)								$	243					$	869
Net income in stockholders' equity, excludes redeemable interests' share						—						—									—						—						—												1,457						—									25						1,482
Other comprehensive income, net of tax, excludes redeemable interests' share						—						—									—						—						—												—						(132)									(18)						(150)
Stock-based awards exercised or vested						—						—									(78)						(1,189)						130												—						—									—						52
Shares repurchased						—						—									—						3,169						(422)												—						—									—						(422)
Recognition of stock-based compensation						—						—									28						—						—												—						—									—						28
Dividends declared ($3.42 per share)						—						—									—						—						—												(1,154)						—									(17)						(1,171)
Other						—						—									7						—						—												13						(1)									—						19
Balance at September 30, 2021						378,597						$	473								$	614					41,853						$	(5,191)											$	7,883					$	(3,305)								$	233					$	707

See notes to the unaudited interim consolidated financial statements.

						Three Months Ended September 30, 2020
(Millions of dollars, shares in thousands, except per share amounts)						Common Stock Issued															Additional Paid-in Capital						Treasury Stock																		Retained Earnings						Accumulated Other Comprehensive Income (Loss)									Non-controlling Interests						Total Stockholders' Equity
			Shares						Amount												Shares						Amount
Balance at June 30, 2020						378,597						$	473								$	554					37,574						$	(4,545)											$	7,299					$	(3,513)								$	227					$	495
Net income in stockholders' equity, excludes redeemable interests' share						—						—									—						—						—												472						—									10						482
Other comprehensive income, net of tax, excludes redeemable interests' share						—						—									—						—						—												—						30									6						36
Stock-based awards exercised or vested						—						—									(2)						(672)						79												—						—									—						77
Shares repurchased						—						—									—						1,280						(195)												—						—									—						(195)
Recognition of stock-based compensation						—						—									45						—						—												—						—									—						45
Dividends declared ($1.07 per share)						—						—									—						—						—												(365)						—									—						(365)
Other						—						—									13						—						—												(11)						1									(1)						2
Balance at September 30, 2020						378,597						$	473								$	610					38,182						$	(4,661)											$	7,395					$	(3,482)								$	242					$	577

						Nine Months Ended September 30, 2020
(Millions of dollars, shares in thousands, except per share amounts)						Common Stock Issued															Additional Paid-in Capital						Treasury Stock																		Retained Earnings						Accumulated Other Comprehensive Income (Loss)									Non-controlling Interests						Total Stockholders' Equity
			Shares						Amount												Shares						Amount
Balance at December 31, 2019						378,597						$	473								$	556					37,149						$	(4,454)											$	6,686					$	(3,294)								$	227					$	194
Net income in stockholders' equity, excludes redeemable interests' share						—						—									—						—						—												1,813						—									34						1,847
Other comprehensive income, net of tax, excludes redeemable interests' share						—						—									—						—						—												—						(189)									(2)						(191)
Stock-based awards exercised or vested						—						—									(54)						(2,294)						266												—						—									—						212
Shares repurchased						—						—									—						3,327						(473)												—						—									—						(473)
Recognition of stock-based compensation						—						—									98						—						—												—						—									—						98
Dividends declared ($3.21 per share)						—						—									—						—						—												(1,095)						—									(17)						(1,112)
Other						—						—									10						—						—												(9)						1									—						2
Balance at September 30, 2020						378,597						$	473								$	610					38,182						$	(4,661)											$	7,395					$	(3,482)								$	242					$	577

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)

						Nine Months Ended September 30
(Millions of dollars)						2021						2020
Operating Activities
Net income						$	1,483					$	1,850
Depreciation and amortization						572						606
Asset impairments						3						—
Stock-based compensation						30						101
Deferred income taxes						(42)						(30)
Net (gains) losses on asset dispositions						34						67
Equity companies' earnings (in excess of) less than dividends paid						(25)						(53)
Operating working capital						(432)						292
Postretirement benefits						39						7
Other						6						2
Cash Provided by Operations						1,668						2,842
Investing Activities
Capital spending						(734)						(894)
Proceeds from dispositions of property						31						5
Investments in time deposits						(632)						(509)
Maturities of time deposits						598						404
Other						1						17
Cash Used for Investing						(736)						(977)
Financing Activities
Cash dividends paid						(1,133)						(1,087)
Change in short-term debt						854						(497)
Debt proceeds						5						1,842
Debt repayments						(269)						(753)
Proceeds from exercise of stock options						52						212
Acquisitions of common stock for the treasury						(393)						(449)
Other						(57)						(40)
Cash Used for Financing						(941)						(772)
Effect of Exchange Rate Changes on Cash and Cash Equivalents						(8)						(17)
Change in Cash and Cash Equivalents						(17)						1,076
Cash and Cash Equivalents - Beginning of Period						303						442
Cash and Cash Equivalents - End of Period						$	286					$	1,518

See notes to the unaudited interim consolidated financial statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020. The terms "Corporation," "Kimberly-Clark," "K-C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.

Highly Inflationary Accounting in Argentina

GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiaries in Argentina (“K-C Argentina”). 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 September 30, 2021, K-C Argentina had a small net peso monetary position. Net sales of K-C Argentina were approximately 1 percent of our consolidated net sales for the nine months ended September 30, 2021 and 2020.

Recently Adopted Accounting Standard

In 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period. We adopted this standard as of January 1, 2021 on either a prospective basis or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to retained earnings as the amount was not material. The effects of this standard on our financial position, results of operations and cash flows were not material.

Note 2. 2018 Global Restructuring Program

In January 2018, we announced the 2018 Global Restructuring Program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. We expect to close or sell 11 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 restructuring is expected to impact our organizations in all major geographies. Workforce reductions are expected to be in the range of 6,300 to 6,400.

The restructuring is expected to be completed in 2021, with total costs now anticipated to be in the range of $2.1 billion to $2.2 billion pre-tax ($1.6 billion to $1.7 billion after tax). Cash costs are expected to be $1.15 billion to $1.2 billion, primarily related to workforce reductions. Non-cash charges are expected to be $950 to $1.0 billion pre-tax and will primarily consist of incremental depreciation, asset write-offs and pension settlement and curtailment charges. Restructuring charges in 2021 are now expected to be $280 to $380 pre-tax ($225 to $300 after tax).

The following net charges were incurred in connection with the 2018 Global Restructuring Program:

			Three Months Ended September 30												Nine Months Ended September 30
			2021						2020						2021						2020
Cost of products sold:
Charges (adjustments) for workforce reductions			$	5					$	15					$	3					$	16
Asset impairments			—						—						3						—
Asset write-offs			14						50						15						59
Incremental depreciation			2						18						10						86
Other exit costs			27						24						67						76
Total			48						107						98						237
Marketing, research and general expenses:
Charges (adjustments) for workforce reductions			16						1						30						(1)
Other exit costs			23						24						48						76
Total			39						25						78						75
Other (income) and expense, net			1						(1)						9						(1)
Nonoperating expense			9						26						65						26
Total charges			97						157						250						337
Provision for income taxes			(16)						(50)						(48)						(83)
Net charges			81						107						202						254
Net impact related to equity companies and noncontrolling interests			(2)						—						(3)						(1)
Net charges attributable to Kimberly-Clark Corporation			$	79					$	107					$	199					$	253

The following summarizes the restructuring liabilities activity:

						2021						2020
Restructuring liabilities at January 1						$	94					$	132
Charges for workforce reductions and other cash exit costs						145						162
Cash payments						(171)						(177)
Currency and other						(3)						(3)
Restructuring liabilities at September 30						$	65					$	114

Restructuring liabilities of $48 and $80 are recorded in Accrued expenses and other current liabilities and $17 and $34 are recorded in Other Liabilities as of September 30, 2021 and 2020, respectively. The impact related to restructuring charges is recorded in Operating working capital and Other Operating Activities, as appropriate, in our consolidated cash flow statements.

Through September 30, 2021, cumulative pre-tax charges for the 2018 Global Restructuring Program were $2.1 billion ($1.6 billion after tax).

Note 3. 2020 Acquisition

On October 1, 2020 (“Acquisition Date”), we acquired Softex Indonesia, in an all-cash transaction for approximately $1.2 billion. The transaction price, subject to working capital and net debt adjustments, resulted in a preliminary purchase price of $1.1 billion as of December 31, 2020 in addition to the assumption of certain indebtedness of Softex Indonesia at closing. The allocation of purchase consideration related to Softex Indonesia was substantially completed in the fourth quarter of 2020. We continue to evaluate potential contingencies that may have existed as of the acquisition date and expect to finalize the purchase price allocation no later than the fourth quarter of 2021.

See Note 3, Acquisition, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for the preliminary purchase price allocation, valuation methodology, and other information related to the Softex Indonesia acquisition.

Note 4. Fair Value Information

The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:

Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.

A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

During the nine months ended September 30, 2021 and for the full year 2020, there were no significant transfers to or from level 3 fair value determinations.

Derivative assets and liabilities are measured on a recurring basis at fair value. At September 30, 2021 and December 31, 2020, derivative assets were $79 and $44, respectively, and derivative liabilities were $39 and $92, respectively. The fair values of derivatives used to manage interest rate risk and commodity price risk are based on LIBOR rates and interest rate swap curves and NYMEX price quotations, respectively. The fair values of hedging instruments used to manage foreign currency risk are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. Measurement of our derivative assets and liabilities is considered a level 2 measurement. Additional information on our classification and use of derivative instruments is contained in Note 7.

Redeemable preferred securities of subsidiaries are measured on a recurring basis at fair value and were $28 as of September 30, 2021 and December 31, 2020, respectively. They are not traded in active markets. The fair values of the redeemable securities were based on a discounted cash flow valuation model. Measurement of the redeemable preferred securities is considered a level 3 measurement.

Company-owned life insurance ("COLI") assets are measured on a recurring basis at fair value. COLI assets were $73 at September 30, 2021 and December 31, 2020, respectively. The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in Other Assets. The COLI policies are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.

The following table includes the fair value of our financial instruments for which disclosure of fair value is required:

			Fair Value Hierarchy Level						Carrying Amount						Estimated Fair Value						Carrying Amount						Estimated Fair Value
						September 30, 2021												December 31, 2020
Assets
Cash and cash equivalents(a)			1						$	286					$	286					$	303					$	303
Time deposits(b)			1						368						368						364						364
Liabilities
Short-term debt(c)			2						1,072						1,072						223						223
Long-term debt(d)			2						7,870						8,968						8,141						9,627

(a)Cash equivalents are composed of certificates of deposit, time deposits and other interest-bearing investments with original maturity dates of 90 days or less. Cash equivalents are recorded at cost, which approximates fair value.

(b)Time deposits are composed of deposits with original maturities of more than 90 days but less than one year and instruments with original maturities of greater than one year, included in Other current assets or Other Assets in the consolidated balance sheet, as appropriate. Time deposits are recorded at cost, which approximates fair value.

(c)Short-term debt is composed of U.S. commercial paper and/or other similar short-term debt issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.

(d)Long-term debt includes the current portion of these debt instruments. Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.

Note 5. Earnings Per Share ("EPS")

There are no adjustments required to be made to net income for purposes of computing EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:

						Three Months Ended September 30												Nine Months Ended September 30
(Millions of shares)						2021						2020						2021						2020
Basic						336.8						341.0						337.4						341.1
Dilutive effect of stock options and restricted share unit awards						0.7						1.3						1.0						1.2
Diluted						337.5						342.3						338.4						342.3

The impact of options outstanding that were not included in the computation of diluted EPS because their exercise price was greater than the average market price of the common shares was insignificant. The number of common shares outstanding as of September 30, 2021 and 2020 was 336.7 million and 340.4 million, respectively.

Note 6. Stockholders' Equity

Net unrealized currency gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are recorded in Accumulated Other Comprehensive Income ("AOCI"). For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in AOCI rather than net income. Upon sale or substantially complete liquidation of any of these subsidiaries, the applicable unrealized translation would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation.

Also included in unrealized translation amounts are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.

The change in net unrealized currency translation for the nine months ended September 30, 2021 was primarily due to the weakening of foreign currencies versus the U.S. dollar, particularly the Korean won, the euro, the Australian dollar and the Peruvian sol.

The changes in the components of AOCI attributable to Kimberly-Clark, net of tax, are as follows:

						Unrealized Translation						Defined Benefit Pension Plans						Other Postretirement Benefit Plans						Cash Flow Hedges and Other
Balance as of December 31, 2019						$	(2,271)					$	(979)					$	(13)					$	(31)
Other comprehensive income (loss) before reclassifications						(233)						(19)						3						15
(Income) loss reclassified from AOCI						—						57			(a)			(1)			(a)			(10)
Net current period other comprehensive income (loss)						(233)						38						2						5
Balance as of September 30, 2020						$	(2,504)					$	(941)					$	(11)					$	(26)
Balance as of December 31, 2020						$	(2,157)					$	(912)					$	(40)					$	(63)
Other comprehensive income (loss) before reclassifications						(266)						5						(12)						56
(Income) loss reclassified from AOCI						—						52			(a)			(3)			(a)			35
Net current period other comprehensive income (loss)						(266)						57						(15)						91
Balance as of September 30, 2021						$	(2,423)					$	(855)					$	(55)					$	28

(a) Included in computation of net periodic benefit costs.

Note 7. Objectives and Strategies for Using Derivatives

As a multinational enterprise, we are exposed to financial risks, such as changes in foreign currency exchange rates, interest rates, and commodity prices. We employ a number of practices to manage these risks, including operating and financing activities and, where appropriate, the use of derivative instruments.

At September 30, 2021 and December 31, 2020, derivative assets were $79 and $44, respectively, and derivative liabilities were $39 and $92, respectively, primarily comprised of foreign currency exchange contracts. Derivative assets are recorded in Other current assets or Other Assets, as appropriate, and derivative liabilities are recorded in Accrued expenses and other current liabilities or Other Liabilities, as appropriate.

Foreign Currency Exchange Rate Risk

Translation adjustments result from translating foreign entities' financial statements into U.S. dollars from their functional currencies. The risk to any particular entity's net assets is reduced to the extent that the entity is financed with local currency borrowings. A portion of our balance sheet translation exposure for certain affiliates, which results from changes in translation rates between the affiliates’ functional currencies and the U.S. dollar, is hedged with cross-currency swap contracts and certain foreign denominated debt which are designated as net investment hedges. The foreign currency exposure on certain non-functional currency denominated monetary assets and liabilities, primarily intercompany loans and accounts payable, is hedged with primarily undesignated derivative instruments.

Derivative instruments are entered into to hedge a portion of forecasted cash flows denominated in foreign currencies for non-U.S. operations' purchases of raw materials, which are priced in U.S. dollars, and imports of intercompany finished goods and work-in-process priced predominantly in U.S. dollars and euros. The derivative instruments used to manage these exposures are designated as cash flow hedges.

Interest Rate Risk

Interest rate risk is managed using a portfolio of variable and fixed-rate debt composed of short and long-term instruments. Interest rate swap contracts may be used to facilitate the maintenance of the desired ratio of variable and fixed-rate debt and are designated as fair value hedges. From time to time, we also hedge the anticipated issuance of fixed-rate debt, and these contracts are designated as cash flow hedges.

Commodity Price Risk

We use derivative instruments, such as forward contracts, to hedge a limited portion of our exposure to market risk arising from changes in prices of certain commodities. These derivatives are designated as cash flow hedges of specific quantities of the underlying commodity expected to be purchased in future months. In addition, we utilize negotiated short-term contract structures, including fixed price contracts, to manage volatility for a portion of our commodity costs.

Fair Value Hedges

Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk. The fair values of these interest rate derivative instruments are recorded as an asset or liability, as appropriate, with the offset recorded in Interest expense. The offset to the change in fair values of the related debt is also recorded in Interest expense. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to Interest expense over the life of the related debt. As of September 30, 2021, the aggregate notional values and carrying values of debt subject to outstanding interest rate contracts designated as fair value hedges were $625 and $638, respectively. For the nine months ended September 30, 2021 and 2020, gains or losses recognized in Interest expense for interest rate swaps were not significant.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is initially recorded in AOCI, net of related income taxes, and recognized in earnings in the same income statement line and period that the hedged exposure affects earnings. As of September 30, 2021, outstanding commodity forward contracts were in place to hedge a limited portion of our estimated requirements of the related underlying commodities in the remainder of 2021 and future periods. As of September 30, 2021, the aggregate notional value of outstanding foreign exchange derivative contracts designated as cash flow hedges was $709. For the nine months ended September 30, 2021 and 2020, no significant gains or losses were reclassified into Interest expense, Cost of products sold or Other (income) and expense, net as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At September 30, 2021, amounts to be reclassified from AOCI into Interest expense, Cost of products sold or Other (income) and expense, net during the next twelve months are not expected to be material. The maximum maturity of cash flow hedges in place at September 30, 2021 is September 2023.

Net Investment Hedges

For derivative instruments that are designated and qualify as net investment hedges, the aggregate notional value was $1.5 billion at September 30, 2021. We exclude the interest accruals on cross-currency swap contracts and the forward points on foreign exchange forward contracts from the assessment and measurement of hedge effectiveness. We recognize the interest accruals on cross-currency swap contracts in earnings within Interest expense. We amortize the forward points on foreign exchange contracts into earnings within Interest expense over the life of the hedging relationship. Changes in fair value of net

investment hedges are recorded in AOCI and offset the change in the value of the net investment being hedged. For the nine months ended September 30, 2021, unrealized gains of $69 related to net investment hedge fair value changes were recorded in AOCI and no significant amounts were reclassified from AOCI to Interest expense.

No significant amounts were excluded from the assessment of net investment, fair value or cash flow hedge effectiveness as of September 30, 2021.

Undesignated Hedging Instruments

Gains or losses on undesignated foreign exchange hedging instruments are immediately recognized in Other (income) and expense, net. A loss of $2 and a gain of $23 were recorded in the three months ended September 30, 2021 and 2020, respectively. A loss of $8 and a gain of $31 were recorded in the nine months ended September 30, 2021 and 2020. The effect on earnings from the use of these non-designated derivatives is substantially neutralized by the transactional gains and losses recorded on the underlying assets and liabilities. At September 30, 2021, the notional value of these undesignated derivative instruments was approximately $2.1 billion.

Note 8. Business Segment Information

We are organized into operating segments based on product groupings. These operating segments have been aggregated into three reportable global business segments: Personal Care, Consumer Tissue and K-C Professional. The reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes Other (income) and expense, net and income and expense not associated with ongoing operations of the business segments, including the costs of corporate decisions related to the 2018 Global Restructuring Program described in Note 2.

The principal sources of revenue in each global business segment are described below:

• Personal Care brands offer our consumers a trusted partner in caring for themselves and their families by delivering confidence, protection and discretion through a wide variety of innovative solutions and products such as disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and other related products. Products in this segment are sold under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise and other brand names.

• Consumer Tissue offers a wide variety of innovative solutions and trusted brands that responsibly improve everyday living for families around the world. Products in this segment include facial and bathroom tissue, paper towels, napkins and related products, and are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve and other brand names.

• K-C Professional partners with businesses to create Exceptional Workplaces, helping to make them healthier, safer and more productive through a range of solutions and supporting products such as wipers, tissue, towels, apparel, soaps and sanitizers. Our brands, including Kleenex, Scott, WypAll, Kimtech and KleenGuard are well known for quality and trusted to help people around the world work better.

Information concerning consolidated operations by business segment is presented in the following tables:

						Three Months Ended September 30																		Nine Months Ended September 30
						2021						2020						Change						2021						2020						Change
NET SALES
Personal Care						$	2,656					$	2,339					+14		%				$	7,635					$	6,990					+9		%
Consumer Tissue						1,541						1,623						-5		%				4,475						4,991						-10		%
K-C Professional						797						705						+13		%				2,314						2,277						+2		%
Corporate & Other						16						16						N.M.						51						46						N.M.
TOTAL NET SALES						$	5,010					$	4,683					+7		%				$	14,475					$	14,304					+1		%
OPERATING PROFIT
Personal Care						$	496					$	486					+2		%				$	1,431					$	1,532					-7		%
Consumer Tissue						222						318						-30		%				687						1,111						-38		%
K-C Professional						96						87						+10		%				332						423						-22		%
Corporate & Other(a)						(150)						(220)						N.M.						(386)						(544)						N.M.
Other (income) and expense, net(a)						7						5						+40		%				24						27						-11		%
TOTAL OPERATING PROFIT						$	657					$	666					-1		%				$	2,040					$	2,495					-18		%

(a) Corporate & Other and Other (income) and expense, net include income and expense not associated with the business segments, including charges related to the 2018 Global Restructuring Program and Softex Indonesia acquisition-related costs. Restructuring charges related to the Personal Care, Consumer Tissue and K-C Professional business segments were $32, $42 and $10, respectively, for the three months ended September 30, 2021, $57, $59, and $15, respectively, for the three months ended September 30, 2020, $71, $84 and $19, respectively, for the nine months ended September 30, 2021, and $131, $135 and $41, respectively for the nine months ended September 30, 2020 .

N.M. - Not Meaningful

Sales of Principal Products:

						Three Months Ended September 30												Nine Months Ended September 30
(Billions of dollars)						2021						2020						2021						2020
Baby and child care products						1.8						1.6						5.3						4.8
Consumer tissue products						1.5						1.6						4.5						5.0
Away-from-home professional products						0.8						0.7						2.3						2.3
All other						0.9						0.8						2.4						2.2
Consolidated						$	5.0					$	4.7					$	14.5					$	14.3

Note 9. Supplemental Balance Sheet Data

The following schedule presents a summary of inventories by major class:

						September 30, 2021																		December 31, 2020
						LIFO						Non-LIFO						Total						LIFO						Non-LIFO						Total
Raw materials						$	141					$	342					$	483					$	131					$	263					$	394
Work in process						143						91						234						103						86						189
Finished goods						545						776						1,321						453						749						1,202
Supplies and other						—						276						276						—						263						263
						829						1,485						2,314						687						1,361						2,048
Excess of FIFO or weighted-average cost over LIFO cost						(216)						—						(216)						(145)						—						(145)
Total						$	613					$	1,485					$	2,098					$	542					$	1,361					$	1,903

Inventories are valued at the lower of cost or net realizable value, determined on the FIFO or weighted-average cost methods, and at the lower of cost or market, determined on the LIFO cost method.

The following schedule presents a summary of property, plant and equipment, net:

			September 30, 2021						December 31, 2020
Land			$	169					$	174
Buildings			2,959						2,932
Machinery and equipment			14,514						14,382
Construction in progress			700						845
			18,342						18,333
Less accumulated depreciation			(10,378)						(10,291)
Total			$	7,964					$	8,042