Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Kimberly-Clark Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,602 – 9.91% × 12,877 = 1,327
The analysis of economic value added reveals a consistent generation of economic profit over the five-year period from 2016 to 2020. While the performance remained positive throughout, it experienced a notable volatility cycle with a significant dip in 2018 followed by a peak in 2020.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory, starting at US$ 2,399 million in 2016 and reaching a period high of US$ 2,602 million by 2020. A significant contraction occurred in 2018, where NOPAT fell to US$ 1,883 million, before returning to growth in 2019 and 2020.
- Cost of Capital
- The cost of capital remained remarkably stable, fluctuating within a narrow range between 9.91% and 10.24%. This stability indicates a consistent risk profile and a steady weighted average cost of capital over the analyzed timeframe.
- Invested Capital
- Invested capital remained relatively stable between 2016 and 2019, fluctuating between US$ 11,239 million and US$ 11,929 million. A notable increase is observed in 2020, where invested capital rose to US$ 12,877 million, suggesting an expansion of the asset base or increased funding requirements.
- Economic Profit
- Economic profit closely mirrored the trends in NOPAT. After reaching US$ 1,276 million in 2017, it declined sharply to US$ 754 million in 2018. A strong recovery followed, culminating in a five-year peak of US$ 1,327 million in 2020. The fact that economic profit increased in 2020 despite the rise in invested capital indicates that the growth in NOPAT sufficiently exceeded the increased cost of financing the additional capital.
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Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Kimberly-Clark Corporation.
6 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 556 × 3.55% = 20
7 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 272 × 21.00% = 57
8 Addition of after taxes interest expense to net income attributable to Kimberly-Clark Corporation.
9 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8 × 21.00% = 2
10 Elimination of after taxes investment income.
The financial performance between 2016 and 2020 is characterized by a period of relative stability, a significant contraction in 2018, and a subsequent recovery that led to peak profitability in 2020. Both net income and net operating profit after taxes (NOPAT) exhibit a synchronized trend, indicating that operational fluctuations were the primary drivers of the bottom-line results.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT demonstrated a moderate increase from US$ 2,399 million in 2016 to US$ 2,464 million in 2017. This was followed by a notable decline to US$ 1,883 million in 2018, representing a sharp dip in operational profitability. However, the metric rebounded strongly in the following years, increasing to US$ 2,321 million in 2019 and reaching a five-year peak of US$ 2,602 million by December 31, 2020.
- Net Income Trajectory
- Net income attributable to the corporation mirrored the NOPAT trend but experienced higher volatility. After rising from US$ 2,166 million in 2016 to US$ 2,278 million in 2017, it fell sharply to US$ 1,410 million in 2018, a more pronounced decrease than that seen in operational profit. The recovery was robust, with net income climbing to US$ 2,157 million in 2019 and peaking at US$ 2,352 million in 2020.
- Comparative Analysis of Operational vs. Net Profitability
- NOPAT remained consistently higher than net income across the entire five-year period. This persistent variance indicates that the company's core operations generate more value than what is captured in the final net income, reflecting the impact of non-operating items, such as interest expenses and other financing costs. The synchronized recovery of both metrics suggests that the improvement in the company's economic value added was driven primarily by a restoration of core operational efficiency.
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Cash Operating Taxes
Kimberly-Clark Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
An analysis of the tax expenditures from 2016 to 2020 reveals a distinct U-shaped trajectory in both the provision for income taxes and actual cash operating taxes. After a period of significant decline reaching a trough in 2018, both metrics experienced a steady recovery through 2020.
- Cash Operating Tax Trends
- Cash operating taxes exhibited a sharp downward trend in the first three years of the period, falling from 1,053 million US dollars in 2016 to 526 million US dollars in 2018, representing a total reduction of approximately 50%. This decline was followed by a two-year period of growth, with expenditures rising to 604 million US dollars in 2019 and further increasing to 686 million US dollars by the end of 2020.
- Correlation Between Provision and Cash Payments
- There is a high degree of positive correlation between the provision for income taxes and cash operating taxes. The provision for income taxes followed a nearly identical pattern, decreasing from 922 million US dollars in 2016 to 471 million US dollars in 2018, before climbing back to 676 million US dollars in 2020. This synchronization suggests that the factors driving the accounting tax expense were closely aligned with the actual cash outflows for taxes during this period.
- Convergence of Tax Metrics
- A notable trend is the narrowing variance between the provision for income taxes and the cash operating taxes paid. In 2016, cash taxes exceeded the provision by 131 million US dollars. By 2020, this gap had reduced significantly to 10 million US dollars. This convergence indicates a tightening alignment between the company's estimated tax liabilities and its actual cash settlements over the five-year window.
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Invested Capital
Kimberly-Clark Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of LIFO reserve. See details »
5 Addition of restructuring liabilities.
6 Addition of equity equivalents to total Kimberly-Clark Corporation stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
Invested capital exhibited relative stability between 2016 and 2019, followed by a notable increase in 2020. The total invested capital fluctuated within a narrow range of approximately US$11.2 billion to US$11.9 billion for the first four years of the period before rising to US$12.877 billion by the end of 2020.
- Total Reported Debt and Leases
- Debt levels remained consistent from 2016 through 2018, hovering around US$8 billion. A gradual upward trend began in 2019, culminating in a significant increase to US$8.920 billion in 2020. This indicates an expansion of leverage toward the end of the observed period.
- Stockholders' Equity
- Equity positions demonstrated extreme volatility, fluctuating between negative and positive values. Deficits were recorded in 2016, 2018, and 2019, while positive equity was reported in 2017 and 2020. This pattern suggests a capital structure characterized by aggressive returns to shareholders or significant treasury stock activity that periodically offset retained earnings.
- Invested Capital Components and Trends
- The growth in invested capital in 2020 was driven by a simultaneous increase in both reported debt and a return to positive stockholders' equity. While the capital base decreased slightly in 2018 to its period low of US$11.239 billion, the subsequent recovery and surge in 2020 represent a substantial expansion of the resources employed in the business operations.
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Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 11.61% | = | 9.42% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 9.91% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,472) | 49,472) | ÷ | 58,528) | = | 0.85 | 0.85 | × | 11.61% | = | 9.81% | ||
| Debt3 | 8,652) | 8,652) | ÷ | 58,528) | = | 0.15 | 0.15 | × | 3.47% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 404) | 404) | ÷ | 58,528) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 58,528) | 1.00 | 10.24% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,045) | 39,045) | ÷ | 47,223) | = | 0.83 | 0.83 | × | 11.61% | = | 9.60% | ||
| Debt3 | 7,687) | 7,687) | ÷ | 47,223) | = | 0.16 | 0.16 | × | 3.28% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 491) | 491) | ÷ | 47,223) | = | 0.01 | 0.01 | × | 3.28% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 47,223) | 1.00 | 10.05% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,170) | 39,170) | ÷ | 47,663) | = | 0.82 | 0.82 | × | 11.61% | = | 9.54% | ||
| Debt3 | 7,945) | 7,945) | ÷ | 47,663) | = | 0.17 | 0.17 | × | 3.64% × (1 – 35.00%) | = | 0.39% | ||
| Operating lease liability4 | 548) | 548) | ÷ | 47,663) | = | 0.01 | 0.01 | × | 3.64% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 47,663) | 1.00 | 9.96% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,797) | 43,797) | ÷ | 52,387) | = | 0.84 | 0.84 | × | 11.61% | = | 9.70% | ||
| Debt3 | 8,056) | 8,056) | ÷ | 52,387) | = | 0.15 | 0.15 | × | 4.16% × (1 – 35.00%) | = | 0.42% | ||
| Operating lease liability4 | 534) | 534) | ÷ | 52,387) | = | 0.01 | 0.01 | × | 4.16% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 52,387) | 1.00 | 10.15% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kimberly-Clark Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,327) | 1,153) | 754) | 1,276) | 1,203) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.30% | 10.11% | 6.70% | 10.70% | 10.22% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,327 ÷ 12,877 = 10.30%
4 Click competitor name to see calculations.
Between 2016 and 2020, the company's ability to generate economic value exhibited volatility, characterized by a sharp contraction in 2018 followed by a consistent recovery and subsequent growth in absolute terms.
- Economic Profit Trends
- Economic profit rose from 1,203 million USD in 2016 to 1,276 million USD in 2017, before experiencing a significant decline to 754 million USD in 2018. A strong recovery was observed over the following two years, with profits climbing to 1,153 million USD in 2019 and reaching a five-year peak of 1,327 million USD by the end of 2020.
- Invested Capital Dynamics
- The invested capital base remained relatively stable from 2016 through 2019, fluctuating within a range of 11,239 million USD to 11,929 million USD. A notable increase in capital deployment occurred in 2020, where invested capital rose to 12,877 million USD, marking the highest level of investment in the analyzed period.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the trajectory of economic profit, peaking at 10.70% in 2017 before dropping sharply to 6.70% in 2018. This compression suggests a temporary reduction in the margin between the return on invested capital and the cost of capital. However, the ratio rebounded to 10.11% in 2019 and 10.30% in 2020, demonstrating a restoration of value creation efficiency despite the expanded capital base in the final year.
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Economic Profit Margin
Kimberly-Clark Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,327) | 1,153) | 754) | 1,276) | 1,203) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 6.93% | 6.25% | 4.08% | 6.99% | 6.61% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,327 ÷ 19,140 = 6.93%
3 Click competitor name to see calculations.
The financial performance between 2016 and 2020 is characterized by steady revenue growth and a period of volatility regarding economic value creation. While net sales followed a generally upward trajectory, economic profit experienced a significant contraction in 2018 before recovering to a five-year peak by the end of 2020.
- Economic Profit Trends
- Economic profit grew from 1,203 million USD in 2016 to 1,276 million USD in 2017. A sharp decline occurred in 2018, with profit falling to 754 million USD. This downward trend was reversed in the following two years, with a recovery to 1,153 million USD in 2019 and a final increase to 1,327 million USD in 2020.
- Net Sales Performance
- Net sales demonstrated consistent, incremental growth for the majority of the period. Values remained stable between 18,202 million USD in 2016 and 18,450 million USD in 2019. A more pronounced increase was observed in 2020, where net sales reached 19,140 million USD, marking the highest revenue level in the analyzed timeframe.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrored the fluctuations in absolute economic profit. The margin rose from 6.61% in 2016 to 6.99% in 2017, before dropping significantly to a period low of 4.08% in 2018. A subsequent recovery phase saw the margin rise to 6.25% in 2019 and 6.93% in 2020, indicating a return to the efficiency levels observed in 2017.
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