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 – 10.04% × 12,877 = 1,310
Between 2016 and 2020, the entity maintained a consistent ability to generate positive economic profit, although the magnitude of value creation experienced significant volatility, particularly in 2018. The overall trajectory indicates a recovery in the final two years of the period, culminating in the highest economic profit level of the five-year span in 2020.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a non-linear trend, starting at 2,399 million USD in 2016 and reaching a peak of 2,602 million USD by 2020. A significant contraction occurred in 2018, where NOPAT fell to 1,883 million USD, representing the lowest point in the analyzed period. Subsequent years showed a robust rebound, with figures increasing in 2019 and further expanding in 2020.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable throughout the period, oscillating within a narrow range between 10.04% and 10.38%. Invested capital showed moderate fluctuations between 2016 and 2019, generally remaining between 11,239 million USD and 11,929 million USD. A notable increase in capital deployment was observed in 2020, with invested capital rising to 12,877 million USD.
- Economic Profit and Value Creation
- Economic profit closely mirrored the volatility of NOPAT, experiencing a sharp decline from 1,260 million USD in 2017 to 738 million USD in 2018. This decline indicates a period of reduced value creation relative to the cost of the capital employed. By 2020, economic profit recovered to 1,310 million USD. The fact that economic profit remained positive across all five years confirms that the return on invested capital consistently exceeded the weighted average cost of capital during this timeframe.
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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$11.239 billion, the subsequent recovery and surge in 2020 represent a substantial expansion of the resources employed in the business operations.
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Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 11.77% | = | 9.55% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 10.04% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | × | 11.77% | = | 9.95% | ||
| 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 | 10.38% | ||||||||||
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 | × | 11.77% | = | 9.73% | ||
| 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 | 10.18% | ||||||||||
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 | × | 11.77% | = | 9.67% | ||
| 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 | 10.10% | ||||||||||
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 | × | 11.77% | = | 9.84% | ||
| 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 | 10.28% | ||||||||||
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 | 1,310) | 1,137) | 738) | 1,260) | 1,187) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.17% | 9.97% | 6.57% | 10.56% | 10.08% | |
| 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 × 1,310 ÷ 12,877 = 10.17%
4 Click competitor name to see calculations.
The financial performance from 2016 to 2020 indicates a consistent ability to generate positive economic profit, although the magnitude of value creation experienced significant volatility during the mid-period. The company maintained a positive economic spread throughout the timeframe, confirming that returns on invested capital remained above the cost of capital.
- Economic Profit Trends
- Economic profit exhibited a fluctuating trajectory, beginning at 1,187 million USD in 2016 and peaking at 1,310 million USD by 2020. A notable contraction occurred in 2018, where economic profit declined to 738 million USD, representing the lowest point in the five-year series. However, a strong recovery followed, with profit returning to pre-2018 levels in 2019 and reaching a period high in 2020.
- Invested Capital Analysis
- Invested capital remained relatively stable between 2016 and 2019, oscillating within a narrow range between 11,239 million USD and 11,929 million USD. A significant expansion in the capital base is observed in 2020, with invested capital rising to 12,877 million USD, suggesting increased investment in the company's asset base or operational scale.
- Economic Spread Ratio Performance
- The economic spread ratio closely mirrored the trends seen in economic profit. The ratio started at 10.08% in 2016 and improved to 10.56% in 2017. A sharp decline to 6.57% was recorded in 2018, coinciding with the dip in economic profit. The ratio subsequently recovered to 9.97% in 2019 and reached 10.17% in 2020, indicating a restoration of the efficiency with which the company generated returns over its cost of capital.
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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 | 1,310) | 1,137) | 738) | 1,260) | 1,187) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 6.84% | 6.16% | 3.99% | 6.90% | 6.52% | |
| 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 × 1,310 ÷ 19,140 = 6.84%
3 Click competitor name to see calculations.
The analysis of the economic profit margin from 2016 to 2020 reveals a period of relative stability interrupted by a significant contraction in 2018, followed by a consistent recovery through 2020.
- Economic Profit Performance
- Economic profit demonstrated volatility over the five-year period. After an initial increase from $1,187 million in 2016 to $1,260 million in 2017, a sharp decline occurred in 2018, where profit dropped to $738 million. This was followed by a strong upward trend, with values recovering to $1,137 million in 2019 and reaching a period maximum of $1,310 million in 2020.
- Net Sales Trajectory
- Net sales exhibited slow but steady growth for the majority of the period. Between 2016 and 2019, sales remained largely stagnant, moving from $18,202 million to $18,450 million. However, a more significant acceleration in revenue was observed in 2020, with net sales increasing to $19,140 million.
- Economic Profit Margin Fluctuations
- The economic profit margin followed a pattern closely aligned with absolute economic profit. The margin rose from 6.52% in 2016 to a peak of 6.90% in 2017. In 2018, the margin experienced a substantial contraction to 3.99%, which is particularly notable as it occurred while net sales were simultaneously increasing, suggesting that the decline in economic value was driven by factors other than revenue loss, such as increased capital costs or operational inefficiencies. The margin subsequently recovered to 6.16% in 2019 and 6.84% in 2020, effectively returning to the levels observed at the start of the period.
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