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 – 8.55% × 12,877 = 1,501
The financial data indicates several notable trends over the five-year period analyzed.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited fluctuations with an overall upward trend. It started at $2,399 million in 2016, rose slightly to $2,464 million in 2017, then declined significantly in 2018 to $1,883 million. Subsequently, it recovered to $2,321 million in 2019 and further increased to $2,602 million in 2020, reaching the highest level in this period.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating mildly around the mid-to-high 8% range. It was 8.75% in 2016, slightly decreased to 8.59% in 2017, inched up to 8.67% in 2018, peaked at 8.84% in 2019, and fell back to 8.55% in 2020. The variations do not suggest significant shifts in capital expense or risk profile over time.
- Invested Capital
- Invested capital showed a modest upward trajectory overall, with some variability. It increased from $11,778 million in 2016 to $11,929 million in 2017, then declined to $11,239 million in 2018. It experienced a slight recovery to $11,405 million in 2019 before a substantial increase to $12,877 million in 2020. This indicates a notable expansion in the capital base by the end of the period.
- Economic Profit
- Economic profit reflected variations closely linked to NOPAT trends, starting at $1,368 million in 2016 and rising to $1,439 million in 2017. There was a decrease to $908 million in 2018, mirroring the dip in operating profit, followed by a recovery to $1,314 million in 2019 and an increase to $1,501 million in 2020, which is the highest point during the timeframe. These fluctuations demonstrate the company’s varying efficiency in generating returns above its cost of capital.
In summary, the data reveals that while the company experienced a downturn in performance in 2018, it effectively recovered in subsequent years, culminating in improved profitability and economic profit in 2020. The cost of capital remained relatively stable throughout, with invested capital increasing notably towards the end of the period, potentially supporting the enhanced profit outcomes.
Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ 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.
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.
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 $12.88 billion, which corresponds with the rise in total debt and equity changes, indicating increased total resources committed to the business. This growth in invested capital may reflect expansion efforts or new investments.
- Overall Trends and Insights
- The data suggest that while debt levels remained steady initially, the company took on more debt in 2020. The stockholders’ equity, although negative for much of the period, shows signs of improvement in the last year, which could reflect enhanced profitability, asset revaluation, or capital restructuring. The rise in invested capital alongside debt and equity changes implies an overall expansion in the financial base of the company during 2020. These trends point to a possible strategic shift or response to external conditions impacting capital structure and financing.
Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 9.94% | = | 8.06% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 8.55% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | × | 9.94% | = | 8.40% | ||
| 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 | 8.84% | ||||||||||
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 | × | 9.94% | = | 8.22% | ||
| 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 | 8.67% | ||||||||||
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 | × | 9.94% | = | 8.17% | ||
| 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 | 8.59% | ||||||||||
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 | × | 9.94% | = | 8.31% | ||
| 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 | 8.75% | ||||||||||
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 | 1,501) | 1,314) | 908) | 1,439) | 1,368) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 11.66% | 11.52% | 8.08% | 12.07% | 11.61% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | 4.47% | — | — | — | — | |
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 × 1,501 ÷ 12,877 = 11.66%
4 Click competitor name to see calculations.
The financial data over the five-year period reveals fluctuating trends in economic profit, invested capital, and the economic spread ratio, each reflecting certain dynamics in profitability and capital efficiency.
- Economic Profit
- The economic profit decreased notably from 2017 to 2018, dropping from 1439 million US dollars to 908 million US dollars. However, it recovered in the subsequent years, increasing to 1314 million in 2019 and further to 1501 million in 2020, reaching its highest value within the period analyzed. This pattern indicates a period of reduced profitability in 2018, followed by a restoration and growth in value creation in the later years.
- Invested Capital
- Invested capital exhibited a generally stable trend with minor variations until 2019, fluctuating between approximately 11,239 million and 11,929 million US dollars. In 2020, there was a significant increase to 12,877 million US dollars, which suggests a notable expansion or increased investment during that year. The rise in invested capital aligns with the recovery and improvement seen in economic profit.
- Economic Spread Ratio
- The economic spread ratio, which measures the return above the cost of capital as a percentage, mimicked the pattern of economic profit. It peaked at 12.07% in 2017, then experienced a marked decline to 8.08% in 2018. Subsequently, it rebounded to 11.52% in 2019 and slightly increased to 11.66% in 2020. This indicates that profitability relative to invested capital weakened considerably in 2018 but regained strength in the following years.
Overall, the data reflects a temporary downturn in profitability and economic spread in 2018, followed by a period of recovery and growth through 2020. The notable increase in invested capital in the final year corresponds with higher economic profit and an improved economic spread ratio, suggesting effective deployment of additional capital that enhanced economic returns.
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 | 1,501) | 1,314) | 908) | 1,439) | 1,368) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 7.84% | 7.12% | 4.91% | 7.88% | 7.51% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | 6.37% | — | — | — | — | |
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 × 1,501 ÷ 19,140 = 7.84%
3 Click competitor name to see calculations.
The financial data for the period under review demonstrates several notable trends and variations in key performance metrics.
- Economic Profit
- The economic profit shows a fluctuating trend over the five-year period. It increased from 1,368 million USD in 2016 to a peak of 1,439 million USD in 2017, followed by a significant decline to 908 million USD in 2018. Subsequently, the economic profit recovered to 1,314 million USD in 2019 and reached the highest value of the period at 1,501 million USD in 2020.
- Net Sales
- Net sales exhibited a relatively stable but slightly upward trend across the same time frame. Starting from 18,202 million USD in 2016, sales increased marginally each year, reaching 19,140 million USD in 2020. The growth rate was modest, with no abrupt changes or declines observed.
- Economic Profit Margin
- The economic profit margin followed a pattern similar to economic profit itself. Initially, the margin increased from 7.51% in 2016 to 7.88% in 2017, decreased sharply to 4.91% in 2018, improved to 7.12% in 2019, and then rose again to 7.84% in 2020. This variability suggests fluctuations in profitability relative to sales during the period.
Overall, the data indicates a period of economic profit volatility, particularly marked by a decline in 2018, whereas net sales demonstrated steady but slow growth. The rebound in both economic profit and profit margin by 2020 suggests improved operational efficiency or favorable market conditions towards the end of the timeframe analyzed.