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 – 9.70% × 12,877 = 1,353
The analysis of economic performance from 2016 to 2020 reveals a period of general stability interrupted by a significant contraction in 2018, followed by a consistent recovery that culminated in a five-year peak by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a fluctuating trend, starting at 2,399 million in 2016 and reaching its highest level of 2,602 million in 2020. A sharp decline was observed in 2018, where NOPAT fell to 1,883 million. Following this trough, operational profitability recovered steadily, surpassing 2017 levels by 2020.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively constant throughout the period, fluctuating within a narrow band between 9.70% and 10.03%. Invested capital showed more variability, decreasing to 11,239 million in 2018 before experiencing a significant increase to 12,877 million by 2020. This growth in the capital base indicates an increase in the total assets employed to generate operating returns toward the end of the observed timeframe.
- Economic Profit Trends
- Economic profit followed a trajectory closely aligned with NOPAT. After an increase to 1,300 million in 2017, a substantial decrease to 777 million occurred in 2018. A strong recovery followed, with economic profit rising to 1,177 million in 2019 and 1,353 million in 2020. The ability to achieve the highest economic profit in 2020, despite the simultaneous increase in invested capital and the associated capital charge, demonstrates that the growth in net operating profit effectively outpaced the cost of the additional capital deployed.
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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 analysis of the annual financial data over the five-year period reveals several notable trends regarding the company's profitability metrics.
- Net Income Attributable to Kimberly-Clark Corporation (US$ in millions)
- Over the period from 2016 to 2020, net income shows some volatility with an overall upward trend. Net income started at 2,166 million USD in 2016, increased to 2,278 million USD in 2017, then experienced a significant decline in 2018 to 1,410 million USD. Following this decline, net income recovered considerably, reaching 2,157 million USD in 2019 and further increasing to 2,352 million USD in 2020. This pattern suggests a temporary setback in 2018, followed by a strong recovery and growth in the subsequent years.
- Net Operating Profit After Taxes (NOPAT) (US$ in millions)
- NOPAT exhibits a similar pattern to net income, indicating a correlation between operational efficiency and overall profitability. The values start at 2,399 million USD in 2016, rise slightly in 2017 to 2,464 million USD, then decline sharply in 2018 to 1,883 million USD. From 2018 onwards, NOPAT increased steadily to 2,321 million USD in 2019 and 2,602 million USD in 2020, surpassing the initial levels reported at the start of the period. This trend shows an initial operational challenge in 2018, followed by a robust performance improvement.
Overall, the data indicates that the company faced a period of decreased profitability in 2018, reflected in both net income and NOPAT, likely due to operational or market challenges. However, the subsequent years demonstrated effective recovery strategies and strong financial performance, with profitability exceeding prior peak levels by 2020. The close alignment between net income and NOPAT trends suggests that operational improvements directly influenced the bottom line.
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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).
- Provision for income taxes
- The provision for income taxes shows a downward trend from 2016 to 2018, declining from 922 million US dollars to 471 million US dollars. This is followed by an increase in the subsequent years, rising to 576 million US dollars in 2019 and further to 676 million US dollars in 2020. Overall, the provision decreased initially but then experienced a moderate recovery, ending lower in 2020 than the initial 2016 figure.
- Cash operating taxes
- Cash operating taxes exhibit a similar trend to the provision for income taxes, starting at 1,053 million US dollars in 2016 and declining steadily to 526 million US dollars in 2018. From 2018 onward, cash operating taxes increased each year, reaching 604 million US dollars in 2019 and 686 million US dollars in 2020. Although the amounts increased after 2018, the 2020 value remained below the initial 2016 level.
- Overall tax-related trends
- Both provision for income taxes and cash operating taxes show a clear pattern of decline during the period 2016 to 2018, followed by a partial rebound from 2019 to 2020. The recovery phase, however, does not fully restore the tax figures to their peak 2016 levels. This pattern may suggest changes in taxable income, tax planning strategies, or other tax-related factors impacting the reported amounts over time.
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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.
- Debt Levels
- The total reported debt and leases demonstrate relative stability from 2016 through 2019, fluctuating between approximately $7.9 billion and $8.1 billion. There is a notable increase in 2020, where the debt rises to $8.92 billion, indicating an increased leverage or possibly additional financing taken during that year.
- Stockholders' Equity
- Stockholders’ equity shows considerable volatility over the five-year period. The figures reveal negative values in most years, with a drastic decline in 2017 reaching -$287 million. A recovery trend appears afterward with values improving to -$33 million in 2019 and then increasing sharply to $626 million in 2020, suggesting a significant improvement in net assets or changes in accounting treatment or capital structure.
- Invested Capital
- Invested capital remains relatively consistent between 2016 and 2019, ranging from $11.2 billion to $11.9 billion. In 2020, there is a marked increase to $12.88 billion, which corresponds with the rise in total debt and equity changes, indicating increased total resources committed to the business. This growth in invested capital may reflect expansion efforts or new investments.
- Overall Trends and Insights
- The data suggest that while debt levels remained steady initially, the company took on more debt in 2020. The stockholders’ equity, although negative for much of the period, shows signs of improvement in the last year, which could reflect enhanced profitability, asset revaluation, or capital restructuring. The rise in invested capital alongside debt and equity changes implies an overall expansion in the financial base of the company during 2020. These trends point to a possible strategic shift or response to external conditions impacting capital structure and financing.
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Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 11.36% | = | 9.21% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 9.70% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | × | 11.36% | = | 9.60% | ||
| 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 | 10.03% | ||||||||||
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 | × | 11.36% | = | 9.39% | ||
| 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 | 9.84% | ||||||||||
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 | × | 11.36% | = | 9.33% | ||
| 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 | 9.76% | ||||||||||
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 | × | 11.36% | = | 9.50% | ||
| 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 | 9.94% | ||||||||||
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 | 1,353) | 1,177) | 777) | 1,300) | 1,228) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.51% | 10.32% | 6.91% | 10.90% | 10.43% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | 3.38% | — | — | — | — | |
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 × 1,353 ÷ 12,877 = 10.51%
4 Click competitor name to see calculations.
The financial performance between 2016 and 2020 is characterized by a period of stability, a significant contraction in 2018, and a subsequent recovery. Value creation remained positive throughout the five-year window, although the efficiency of capital utilization experienced a notable temporary decline.
- Economic Profit Trends
- Economic profit exhibited an initial increase from 1,228 million USD in 2016 to 1,300 million USD in 2017. A sharp decline was observed in 2018, with profit falling to 777 million USD. This downward trend reversed in 2019 and 2020, with values climbing to 1,177 million USD and peaking at 1,353 million USD, respectively.
- Invested Capital Dynamics
- Invested capital remained relatively constant from 2016 through 2019, fluctuating between 11,239 million USD and 11,929 million USD. A significant increase in the capital base occurred in 2020, where invested capital rose to 12,877 million USD, indicating an expansion in the company's deployed resources.
- Economic Spread Ratio Analysis
- The economic spread ratio followed a trajectory consistent with economic profit. The ratio remained stable between 10.43% and 10.90% during 2016 and 2017, before dropping precipitously to 6.91% in 2018. This dip indicates a compression in the spread between the return on invested capital and the cost of capital. A recovery was observed in the subsequent two years, with the ratio returning to 10.32% in 2019 and reaching 10.51% in 2020, signaling a restoration of capital efficiency to pre-2018 levels.
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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 | 1,353) | 1,177) | 777) | 1,300) | 1,228) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 7.07% | 6.38% | 4.20% | 7.12% | 6.75% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | 4.82% | — | — | — | — | |
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 × 1,353 ÷ 19,140 = 7.07%
3 Click competitor name to see calculations.
The financial performance from 2016 to 2020 is characterized by a period of relative stability in top-line revenue contrasted with significant volatility in the generation of economic value. While net sales exhibited a gradual upward trajectory, economic profit and the corresponding margin experienced a sharp contraction in 2018 before recovering to peak levels by the end of the period.
- Net Sales Performance
- Net sales remained consistently strong, growing from 18,202 million US dollars in 2016 to 19,140 million US dollars in 2020. This represents a steady expansion of the revenue base, with only a marginal fluctuation occurring in 2019.
- Economic Profit Volatility
- Economic profit demonstrated significant fluctuations, starting at 1,228 million US dollars in 2016 and peaking at 1,300 million US dollars in 2017. A substantial decline occurred in 2018, where the value dropped to 777 million US dollars. However, a strong recovery followed, with economic profit rising to 1,177 million US dollars in 2019 and reaching a five-year high of 1,353 million US dollars in 2020.
- Economic Profit Margin Trends
- The economic profit margin closely mirrors the trends seen in absolute economic profit. After an initial increase from 6.75% in 2016 to 7.12% in 2017, the margin contracted sharply to 4.20% in 2018. This decline suggests a period where the cost of capital increased relative to the operating profit generated. The subsequent recovery to 6.38% in 2019 and 7.07% in 2020 indicates a restoration of value-creation efficiency, returning the margin to levels slightly above those recorded at the start of the analyzed period.
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