KMB US Equity☆

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

This MD&A is intended to provide investors with an understanding of our recent performance, financial condition and prospects. This discussion and analysis compares 2020 results to 2019. For a discussion that compares our 2019 results to 2018, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2019 Annual Report on Form 10-K. The reference to "N.M." indicates that the calculation is not meaningful. In addition, we provide commentary regarding organic sales growth, which describes the impact of changes in volume, product mix and net selling prices on net sales. Changes in foreign currency exchange rates and acquisitions also impact the year-over-year change in net sales. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

The following will be discussed and analyzed:

•Overview of Business

•Overview of 2020 Results

•Impact of COVID-19

•Results of Operations and Related Information

•Unaudited Quarterly Data

•Liquidity and Capital Resources

•Critical Accounting Policies and Use of Estimates

•New Accounting Standards

•Information Concerning Forward-Looking Statements

Throughout this MD&A, we refer to financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures. These measures include adjusted gross and operating profit, adjusted net income, adjusted earnings per share, adjusted other (income) and expense, net, and adjusted effective tax rate. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the financial measures used to evaluate management.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures, and they should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. There are limitations to these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items being excluded. We compensate for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures.

The non-GAAP financial measures exclude the following items for the relevant time periods as indicated in the reconciliations included later in this MD&A:

•2018 Global Restructuring Program - In 2018, we initiated a restructuring program to reduce our structural cost base by streamlining and simplifying our manufacturing supply chain and overhead organization. See Item 8, Note 2 to the consolidated financial statements for details.

•Softex Indonesia Acquisition-Related Costs - Transaction and integration costs associated with the acquisition of Softex Indonesia. See Item 8, Note 3 to the consolidated financial statements for details.

•Brazil Business Tax Credits - In the fourth quarter of 2020, we received a favorable legal ruling that resolved certain matters related to prior years' business taxes in Brazil. See Item 8, Note 1 to the consolidated financial statements for details.

•Property Sale Gain - In the fourth quarter of 2019, we recognized a gain on the sale of property associated with a former manufacturing facility that was closed in 2012 as part of a past restructuring.

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Overview of Business

We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 34 countries, including our equity affiliates, and products sold in more than 175 countries and territories. Our products are sold under well-known brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. We have three reportable business segments: Personal Care, Consumer Tissue and K-C Professional. These business segments are described in greater detail in Item 8, Note 14 to the consolidated financial statements.

In operating our business, we seek to:

•grow our portfolio of brands through innovation, category development and commercial execution,

•leverage our cost and financial discipline to fund growth and improve margins, and

•allocate capital in value-creating ways.

We describe our business outside North America in two groups – Developing and Emerging Markets ("D&E") and Developed Markets. D&E Markets comprise Eastern Europe, the Middle East and Africa, Latin America and Asia-Pacific, excluding Australia and South Korea. Developed Markets consist of Western and Central Europe, Australia and South Korea.

On October 1, 2020, we acquired Softex Indonesia, a leader in the fast-growing Indonesian personal care market, in an all-cash transaction for approximately $1.2 billion. This transaction significantly expands our presence in an important D&E market and is a strong strategic fit with our core business. Softex Indonesia generated net sales of approximately $420 in 2019. We financed the transaction through a combination of short-term commercial paper, cash on hand and the issuance of a $600 bond. See Item 8, Note 3 to the consolidated financial statements for details.

Overview of 2020 Results

•Net sales of $19.1 billion increased 4 percent. Organic sales increased 6 percent. Changes in foreign currency exchange rates reduced sales by 2 percent.

•In North America, organic sales increased 10 percent in consumer products and decreased 5 percent in K-C Professional.

•Outside North America, organic sales increased 3 percent in D&E Markets and 6 percent in Developed Markets.

•Operating Profit and Net Income Attributable to Kimberly-Clark were $3,244 and $2,352 in 2020, respectively.

•Diluted earnings per share were $6.87 in 2020 compared to $6.24 in 2019. Results in 2020 and 2019 include net charges of $0.94 and $0.72, respectively, related to the 2018 Global Restructuring Program. Results in 2020 also include acquisition-related costs of $0.08 associated with the acquisition of Softex Indonesia and a benefit of $0.15 related to the resolution of certain business tax matters in Brazil. Results in 2019 also include a net gain of $0.07 related to the sale of property associated with a former manufacturing facility that was closed as part of a past restructuring.

•We continue to focus on generating cash flow and allocating capital to shareholders. Cash provided by operations was $3.7 billion in 2020. We raised our dividend in 2020 by 4 percent, the 48th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2020 amounted to $2.15 billion.

In 2021, we plan to continue to execute our strategies for long-term success which include delivering balanced, sustainable growth by growing our brands in-line with or ahead of category growth, leveraging our cost and financial discipline to fund growth and improve margins, and allocating capital in value-creating ways. Our growth strategy is built on two pillars. Elevate our core business is our first pillar and is driven by delivering value-added innovations and driving category opportunities. Accelerating growth in D&E markets is our second pillar and emphasizes Personal Care and K-C Professional with Latin America, China, Eastern Europe and ASEAN as our priority markets. Both strategies are enabled by our focus on accelerating and investing in our commercial capabilities through digital marketing, revenue growth management, consumer-inspired innovation and strong in-market execution.

Our strong legacy of financial discipline supports our growth strategy by driving ongoing supply chain productivity through our FORCE (Focused On Reducing Costs Everywhere) program, completing the execution of the 2018 Global Restructuring program, controlling discretionary spending, driving down working capital and maintaining the top-tier return on invested

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capital. Our capital allocation strategy is consistent with our historical approach of disciplined capital spending, payment of a top tier dividend, evaluation of acquisition opportunities and allocation of excess cash flow to share repurchases.

We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" in this Form 10-K for additional information.

Impact of COVID-19

We continue to actively address the COVID-19 situation and its impact globally. We believe that we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and severity of this global pandemic or its ultimate impact on the global economy and our business and results.

We have experienced increased volatility in demand for some of our products as consumers adapt to the evolving environment. Beginning in the first quarter of 2020, particularly in March, demand increased in our Consumer Tissue and Personal Care business segments across all major geographies as consumers increased home inventory levels in response to COVID-19. The increase was followed by a period of demand softness as consumers used existing home inventories and demand returned to more normal levels. Demand for our consumer tissue products was elevated throughout 2020 as more people spent more time at home. Our K-C Professional business experienced volume declines throughout 2020 reflecting the reduction in away from home demand.

During 2020, we experienced temporary closures of certain facilities, though we did not experience a material impact from a plant closure and our facilities were largely exempt or partially exempt from government closure orders. At many of our facilities, we have been experiencing increased employee absences, which may continue in the current situation.

During 2020, we also experienced increased volatility in foreign currency exchange rates and commodity prices, as certain countries experienced increased macro-economic volatility from the COVID-19 situation.

Results of Operations and Related Information

This section presents a discussion and analysis of net sales, operating profit and other information relevant to an understanding of 2020 results of operations.

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Consolidated

Selected Financial Results Year Ended December 31

Net Sales:

Intergeographic sales (272) (266) +2 %

Operating Profit:

Corporate & Other(a) (720) (787) N.M.

Other (income) and expense, net(a) (54) (210) -74 %

Provision for income taxes (676) (576) +17 %

Share of net income of equity companies 142 123 +15 %

Net Income Attributable to Kimberly-Clark Corporation 2,352 2,157 +9 %

Diluted Earnings per Share 6.87 6.24 +10 %

(a) Corporate & Other and Other (income) and expense, net includes income and expenses not associated with the business segments, including adjustments as indicated in the Non-GAAP Reconciliations.

GAAP to Non-GAAP Reconciliations of Selected Financial Results

Twelve Months Ended December 31, 2020

Other (income) and expense, net (54) (9) — (77) 32

Nonoperating expense (70) (36) — — (34)

Effective tax rate 23.1 % — — — 22.7 %

Share of net income of equity companies 142 (1) — — 143

Net income attributable to noncontrolling interests (44) 3 — — (47)

Net Income Attributable to Kimberly-Clark Corporation 2,352 (323) (27) 51 2,651

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Twelve Months Ended December 31, 2019

Marketing, research and general expenses 3,254 99 — 3,155

Other (income) and expense, net (210) (194) (31) 15

Nonoperating expense (91) (45) — (46)

Effective tax rate 21.7 % — — 23.0 %

Share of net income of equity companies 123 (2) — 125

Net income attributable to noncontrolling interests (40) 2 — (42)

Net income attributable to Kimberly-Clark Corporation 2,157 (248) 24 2,381

(a) "As Adjusted Non-GAAP" may not equal "As Reported" plus "Adjustments" as a result of rounding.

Analysis of Consolidated Results

Net Sales Percent Change Adjusted Operating Profit Percent Change

Volume 4 Volume 8

Net Price 1 Net Price 8

Mix/Other 1 Input Costs 5

Currency (2) Cost Savings(c) 17

Total(a) 4 Currency Translation (1)

Other(d) (28)

Organic(b) 6 Total 9

(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(c) Combined benefits of the FORCE program and 2018 Global Restructuring Program.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Net sales of $19.1 billion increased 4 percent compared to the year ago period. Operating profit was $3,244 in 2020 and $2,991 in 2019. Adjusted operating profit was $3,582 in 2020, up 9 percent compared to $3,281 in 2019. Results benefited from organic sales growth, $455 of FORCE cost savings and $120 of cost savings from the 2018 Global Restructuring Program. Input costs decreased $175, driven by pulp. The comparison was impacted by other manufacturing cost increases, unfavorable currency effects, increased advertising spending and higher general and administrative costs.

Other (income) and expense, net of $54 in 2020 primarily reflected tax credits recognized related to a favorable legal ruling that resolved certain matters related to prior years' business taxes in Brazil. In 2019, Other (income) and expense, net of $210 primarily reflected gains on the sales of manufacturing facilities and associated real estate related to the 2018 Global Restructuring Program and property associated with a former manufacturing facility that was closed as part of a past restructuring. Adjusted other (income) and expense, net was $32 and $15 of expense in 2020 and 2019, respectively.

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The effective tax rate of 23.1 percent in 2020 increased compared to the effective tax rate of 21.7 percent in 2019. The rate in 2019 included a net benefit of $47 related to a nonrecurring capital loss from a legal entity restructuring. See additional details in Item 8, Note 12 to the consolidated financial statements. The adjusted effective tax rate was 22.7 percent compared to 23.0 percent in 2019.

Our share of net income of equity companies was $142 in 2020 and $123 in 2019. Kimberly-Clark de Mexico, S.A.B. de C.V. ("KCM") results in 2020 benefited from organic sales growth, lower input costs and cost savings but were negatively impacted by unfavorable currency effects.

Diluted earnings per share were $6.87 in 2020 and $6.24 in 2019. Adjusted earnings per share of $7.74 in 2020 increased 12 percent compared to $6.89 in 2019. The increase was driven by growth in adjusted operating profit, along with higher net income from equity companies and declines in the share count and adjusted effective tax rate.

Business Segments

Personal Care

Net Sales Percent Change Operating Profit Percent Change

Volume 4 Volume 7

Net Price — Net Price 2

Mix/Other 1 Input Costs 2

Acquisition 1 Cost Savings(c) 15

Currency (4) Currency Translation (2)

Total(a) 3 Other(d) (22)

Organic(b) 5 Total 2

(a) Total may not equal the sum of volume, net price, mix/other, acquisition and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(c) Combined benefits of the FORCE program and 2018 Global Restructuring Program.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Net sales in North America increased 6 percent. Volumes increased 4 percent, primarily driven by broad-based growth in baby and child care as well as increases in adult care. Changes in net selling prices and product mix each increased sales by 1 percent.

Net sales in D&E Markets decreased 1 percent. Changes in foreign currency exchange rates decreased sales by 9 percent, primarily in Latin America. Volumes increased 4 percent led by growth in China, Eastern Europe, Brazil and India. Changes in product mix and the Softex Indonesia acquisition each increased sales by 2 percent. The improvements in product mix were primarily in China.

Net sales in Developed Markets outside North America increased 1 percent. Changes in product mix increased sales by 2 percent, primarily in South Korea, and volumes increased 1 percent. Changes in foreign currency exchange rates and net selling prices each decreased sales by 1 percent.

Operating profit of $1,933 increased 2 percent. The comparison was positively impacted by organic sales growth, cost savings and lower input costs, partially offset by unfavorable foreign currency effects, increases in other manufacturing costs and higher marketing and general and administrative costs.

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Consumer Tissue

Net Sales Percent Change Operating Profit Percent Change

Net Price 2 Net Price 12

Mix/Other (1) Input Costs 13

Currency (1) Cost Savings(c) 20

Total(a) 12 Currency Translation —

Other(d) (28)

Organic(b) 13 Total 44

(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(c) Combined benefits of the FORCE program and 2018 Global Restructuring Program.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Net sales in North America increased by 17 percent. Volume increased 14 percent reflecting strong demand related to the COVID-19 and work from home environment, along with improved performance in Kleenex facial tissue. Volumes were up double-digits in all major product categories. Changes in net selling prices increased sales by 4 percent, driven by lower promotion spending. Changes in product mix decreased sales by 2 percent.

Net sales in D&E Markets decreased 1 percent. Changes in foreign currency exchange rates decreased sales by approximately 6 percent, primarily in Latin America, and changes in net selling prices decreased sales by 2 percent. Volumes increased 4 percent, led by improvements in Latin America, and changes in product mix increased sales by 2 percent.

Net sales in Developed Markets outside North America increased 14 percent. Volumes increased 12 percent. driven by strong growth in South Korea and Western and Central Europe and reflecting strong demand related to the COVID-19 and work from home environment. Changes in product mix increased sales by 1 percent.

Operating profit of $1,448 increased 44 percent. Results benefited from higher volumes and net selling prices, cost savings and lower input costs, partially offset by increases in marketing and general and administrative costs, other manufacturing costs and unfavorable foreign currency effects.

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K-C Professional

Net Sales Percent Change Operating Profit Percent Change

Volume (11) Volume (21)

Net Price 3 Net Price 13

Mix/Other 2 Input Costs —

Currency (1) Cost Savings(c) 13

Total(a) (8) Currency Translation (1)

Other(d) (24)

Organic(b) (7) Total (20)

(a) Total may not equal the sum of volume, net price, mix/other and currency due to rounding.

(b) Combined impact of changes in volume, net price and mix/other.

(c) Combined benefits of the FORCE program and 2018 Global Restructuring Program.

(d) Includes impact of changes in product mix, marketing, research and general expenses, foreign currency transaction effects and other manufacturing costs.

Net sales in North America decreased 5 percent. Volumes decreased 10 percent, reflecting lower away from home demand and challenging business conditions following the outbreak of COVID-19. Changes in product mix and net selling prices increased sales by 3 percent and 2 percent, respectively.

Net sales in D&E Markets decreased 21 percent. Volumes decreased by 17 percent, reflecting lower away from home demand and challenging business conditions following the outbreak of COVID-19 with declines in all major markets. Changes in foreign currency exchange rates and product mix decreased sales by 5 percent and 2 percent, respectively, partially offset by changes in net selling prices which increased sales by 3 percent, all primarily related to Latin America.

Net sales in Developed Markets outside North America decreased 4 percent. Volumes decreased 11 percent, reflecting lower away from home demand and challenging business conditions following the outbreak of COVID-19, primarily in Western and Central Europe. Changes in product mix and net selling prices increased sales by 4 percent and 3 percent, respectively, also primarily in Western and Central Europe.

Operating profit of $528 decreased 20 percent. The comparison was impacted by lower volumes, other manufacturing cost increases, and increased general and administrative costs. Results benefited from favorable net selling prices and cost savings.

2018 Global Restructuring Program

Annual pre-tax savings from the 2018 Global Restructuring Program are now expected to be $540 to $560 by the end of 2021. Savings for 2020 were $120, bringing cumulative savings to $420.

To implement this program, we expect to incur incremental capital spending of approximately $600 to $700 by the end of 2021. See Item 8, Note 2 to the consolidated financial statements for additional information.

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Unaudited Quarterly Data

Fourth Third Second First Fourth Third Second First

(a) Quarterly results in 2020 and 2019 were impacted by charges related to the 2018 Global Restructuring Program. See Item 8, Note 2 to the consolidated financial statements for details. Third and fourth quarter results in 2020 were impacted by acquisition-related costs associated with the acquisition of Softex Indonesia. See Item 8, Note 3 to the consolidated financial statements for details. Fourth quarter results in 2020 were also impacted by business tax credits related to the resolution of certain Brazil tax matters. See Item 8, Note 1 for details.

Liquidity and Capital Resources

Cash Provided by Operations

Cash provided by operations was $3.7 billion in 2020 compared to $2.7 billion in 2019. The increase was driven by improved working capital and higher earnings.

Obligations

The following table presents our total contractual obligations for which cash flows are fixed or determinable.

•The unconditional purchase obligations are for the purchase of raw materials, primarily superabsorbent materials, pulp and utilities. Although we are primarily liable for payments on the above operating leases and unconditional purchase obligations, based on historic operating performance and forecasted future cash flows, we believe exposure to losses, if any, under these arrangements is not material.

•The open purchase orders displayed in the table represent amounts for goods and services we have negotiated for delivery.

The table does not include amounts where payments are discretionary or the timing is uncertain. The following payments are not included in the table:

•We will fund our defined benefit pension plans to meet or exceed statutory requirements and currently expect to contribute approximately $50 to these plans in 2021.

•Other postretirement benefit payments are estimated using actuarial assumptions, including expected future service, to project the future obligations. Based upon those projections, we anticipate making annual payments for these obligations of approximately $50 through 2030.

•Accrued income tax liabilities for uncertain tax positions, deferred taxes and noncontrolling interests.

Investing

Our capital spending was $1.2 billion in 2020 and 2019, including incremental spending related to the 2018 Global Restructuring Program. Acquisition, net of cash acquired of $1.1 billion in 2020 reflected the purchase of Softex Indonesia.

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Proceeds from dispositions of property in 2019 of $242 primarily reflects the proceeds from the sales of manufacturing facilities and associated real estate related to the 2018 Global Restructuring Program and property associated with a former manufacturing facility that was closed as part of a past restructuring. We expect capital spending to be approximately $1.2 billion to $1.3 billion in 2021, including spending associated with the 2018 Global Restructuring Program and other growth initiatives.

Financing

We issue long-term debt in the public market periodically. Proceeds from the offerings are used for general corporate purposes, including repayment of maturing debt or outstanding commercial paper indebtedness. See Item 8, Note 5 to the consolidated financial statements for details.

Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other similar short-term debt issued by non-U.S. subsidiaries, was $223 as of December 31, 2020 (included in debt payable within one year on the consolidated balance sheet). The average month-end balance of short-term debt for the twelve months ended December 31, 2020 was $365. These short-term borrowings provide supplemental funding for supporting our operations. The level of short-term debt generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as pension contributions, dividends and income taxes.

At December 31, 2020, total debt was $8.4 billion compared to $7.7 billion at December 31, 2019.

We maintain a $2.0 billion revolving credit facility which expires in June 2023 and a $750 revolving credit facility which expires in June 2021. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.

In July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (LIBOR), announced that it intends to phase out LIBOR by the end of 2021. We are currently evaluating the potential effect of the eventual replacement of the LIBOR, but we do not expect the effect to be material. Accounting guidance has been issued to ease the transition to alternative reference rates from a financial reporting perspective. See Item 8, Note 1 to the consolidated financial statements for details.

We paid $1.5 billion in dividends in 2020. The Board of Directors approved a dividend increase of 6.5 percent for 2021. We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During 2020, we repurchased 4.9 million shares of our common stock at a cost of $700 through a broker in the open market. We are targeting full-year 2021 share repurchases between $650 and $750, subject to market conditions. On January 22, 2021, the Corporation’s Board of Directors authorized a new share repurchase program, pursuant to which the Corporation is authorized to repurchase up to 40 million shares of the Corporation’s common stock, subject to a limit of $5 billion in aggregate expenditures. The authorization is incremental to the remaining shares available to be repurchased under the current share repurchase program authorized on November 13, 2014.

We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, payments for our 2018 Global Restructuring Program, capital spending, pension contributions, dividends and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.

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Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The critical accounting policies we used in the preparation of the consolidated financial statements are those that are important both to the presentation of our financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to accruals for sales incentives and trade promotion allowances, pension and other postretirement benefits, deferred income taxes and potential income tax assessments. These critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.

Sales Incentives and Trade Promotion Allowances

Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions and other activities conducted by our customers to promote our products. Rebate and promotion accruals are based on estimates of the quantity of customer sales. Promotion accruals also consider estimates of the number of consumer coupons that will be redeemed and timing and costs of activities within the promotional programs. Generally, the estimated redemption value of consumer coupons and related expense are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories, and the cost is recorded when the related revenue from customers is realized. Our related accounting policies are discussed in Item 8, Note 1 to the consolidated financial statements.

Employee Postretirement Benefits

Substantially all regular employees in the U.S. and the United Kingdom are covered by defined contribution retirement plans and certain U.S. and United Kingdom employees previously earned benefits covered by defined benefit pension plans that currently provide no future service benefit (the "Principal Plans"). Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. Our related accounting policies and account balances are discussed in Item 8, Note 7 to the consolidated financial statements.

Changes in certain assumptions could affect pension expense and the benefit obligations, particularly the estimated long-term rate of return on plan assets and the discount rate used to calculate the obligations:

•Long-term rate of return on plan assets. The expected long-term rate of return is evaluated on an annual basis. In setting these assumptions, we consider a number of factors including projected future returns by asset class relative to the target asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered appropriate.

As of December 31, 2020, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $1.1 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, and whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required. If the expected long-term rate of return on assets for the Principal Plans were lowered by 0.25 percent, the impact on annual pension expense would not be material in 2021.

•Discount rate. The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 2020 was based on a portfolio of high quality corporate debt securities with cash flows that largely match the expected benefit payments of the plan. For the United Kingdom plan, the discount rate was determined based on yield curves constructed from a portfolio of high quality corporate debt securities. Each year's expected future benefit payments were discounted to their present value at the appropriate yield curve rate to determine the pension obligations. If the discount rate assumptions for these same plans were reduced by 0.25 percent, the increase in annual pension expense would not be material in 2021, and the December 31, 2020 pension liability would increase by about $146.

•Other assumptions. There are a number of other assumptions involved in the calculation of pension expense and benefit obligations, primarily related to participant demographics and benefit elections.

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Pension expense for defined benefit pension plans is estimated to approximate $85 in 2021, including incremental charges resulting from 2018 Global Restructuring Program actions. Pension expense beyond 2021 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered participants in the plans.

Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. Changes in significant assumptions could affect the consolidated expense and benefit obligations, particularly the discount rate used to calculate the obligations and the health care cost trend rate:

•Discount rate. The determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefit section above, and the methodology for each country is the same as the methodology used to determine the discount rate for that country's pension obligation. If the discount rate assumptions for these plans were reduced by 0.25 percent, the impact to 2021 other postretirement benefit expense and the increase in the December 31, 2020 benefit liability would not be material.

•Health care cost trend rate. The health care cost trend rate is based on a combination of inputs including our recent claims history and insights from external advisers regarding recent developments in the health care marketplace, as well as projections of future trends in the marketplace.

Deferred Income Taxes and Potential Assessments

As a global organization, we are subject to income tax requirements in various jurisdictions in the U.S. and internationally. Changes in certain assumptions related to income taxes could significantly affect consolidated results, particularly with regard to valuation allowances on deferred tax assets, undistributed earnings of subsidiaries outside the U.S. and uncertain tax positions. Our income tax related accounting policies, account balances and matters affecting income taxes are discussed in Item 8, Note 12 to the consolidated financial statements.

•Deferred tax assets and related valuation allowances. We have recorded deferred tax assets related to, among other matters, income tax loss carryforwards, income tax credit carryforwards and capital loss carryforwards and have established valuation allowances against these deferred tax assets. These carryforwards are primarily in non-U.S. taxing jurisdictions and in certain states in the U.S. Foreign tax credits earned in the U.S. in current and prior years, which cannot be used currently, also give rise to net deferred tax assets. In determining the valuation allowances to establish against these deferred tax assets, many factors are considered, including the specific taxing jurisdiction, the carryforward period, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

•Undistributed earnings. As of December 31, 2020, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $7.9 billion. Earnings of $5.2 billion were previously subject to tax, primarily due to the one-time transition tax on foreign earnings required by the Tax Cuts and Jobs Act. Any additional taxes due with respect to such previously-taxed earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes. Deferred taxes have been recorded on $0.7 billion of earnings, most of which were previously taxed for U.S. federal income tax purposes, of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute the remaining $4.5 billion of previously taxed foreign earnings and therefore have not recorded deferred taxes for foreign and U.S. state income taxes on such earnings. While the transition tax resulted in a reduction of the excess amount for financial reporting over the tax basis in our foreign subsidiaries, any remaining amount of financial reporting over tax basis after such reduction could be subject to additional taxes, if repatriated. However, we consider any excess to be indefinitely reinvested. The determination of deferred tax liabilities on the amount of financial reporting over tax basis or the $4.5 billion of previously taxed foreign earnings is not practicable.

•Uncertain tax positions. We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate. Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities or the expiration of the statute of limitations.

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Goodwill and Other Intangible Assets

Goodwill and other indefinite-lived intangible assets are not subject to amortization and are tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Intangible assets that are deemed to have finite lives are amortized over their useful lives, generally ranging from 10 to 20 years. We typically obtain the assistance of third-party valuation specialists to measure the acquisition date fair values of goodwill and other intangible assets acquired.

Events and conditions that could result in impairment include a sustained drop in the market price of our common shares, increased competition or loss of market share, obsolescence, product claims that result in a significant loss of sales or profitability over the product life, deterioration in macroeconomic conditions, or declining financial performance in comparison to projected results.

Our related accounting policies and our acquisition of Softex Indonesia are discussed in Item 8, Notes 1 and 3, respectively, to the consolidated financial statements.

Goodwill

In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as macroeconomic, industry and competitive conditions, legal and regulatory environments, historical and projected financial performance, significant changes in the reporting unit and the magnitude of excess fair value over carrying amount from the previous quantitative impairment testing. If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed. When a quantitative test is considered necessary, estimates of fair value for goodwill impairment testing are determined based on a discounted cash flow model and a market-based approach. We use inputs from our long-range planning process to determine growth rates for sales and earnings. The other key estimates and factors used in the discounted cash flow include, but are not limited to, discount rates, actual business trends experienced, commodity prices, foreign exchange rates, inflation and terminal growth rates.

For 2020, we completed the required annual assessment of goodwill for impairment for all of our reporting units using a qualitative assessment as of the first day of the third quarter, and we determined that it is more likely than not that the fair value is more than the carrying amount for each of our reporting units.

Other Intangible Assets

We evaluate the useful lives of our other intangible assets, primarily brands, to determine if they are finite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

Our estimate of the fair value of our brand assets is based on a discounted cash flow model and a market-based approach using inputs which include projected revenues from our long-range plan, assumed royalty rates that could be payable if we did not own the brands, and a discount rate. The cash flows used in the discounted cash flow model are consistent with those we use in our internal planning, which gives consideration to actual business trends experienced and the long-term business strategy.

We performed our 2020 impairment assessment of our intangible assets as of the first day of the third quarter of 2020, and based upon a qualitative assessment, no impairment indicators were found to be present.

New Accounting Standards

See Item 8, Note 1 to the consolidated financial statements for a description of new accounting standards and their anticipated effects on our consolidated financial statements.

Information Concerning Forward-Looking Statements

Certain matters contained in this report concerning the business outlook, including the anticipated cost savings from our FORCE program, costs and savings from the 2018 Global Restructuring Program, cash flow and uses of cash, growth initiatives, innovations, marketing and other spending, net sales, anticipated currency rates and exchange risks, including the impact in Argentina, raw material, energy and other input costs, effective tax rate, contingencies and anticipated transactions of Kimberly-Clark, including dividends, share repurchases and pension contributions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are based upon management's expectations and

24 KIMBERLY-CLARK CORPORATION - 2020 Annual Report

beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.

The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control, including pandemics (including the ongoing COVID-19 outbreak), epidemics, fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, potential competitive pressures on selling prices for our products, energy costs, general economic and political conditions globally and in the markets in which we do business, as well as our ability to maintain key customer relationships and to realize the expected benefits and synergies of the Softex Indonesia acquisition, could affect the realization of these estimates.

The factors described under Item 1A, "Risk Factors" in this Form 10-K, or in our other SEC filings, among others, could cause our future results to differ from those expressed in any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a multinational enterprise, we are exposed to risks such as changes in foreign currency exchange rates, interest rates and commodity prices. A variety of practices are employed to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation. Foreign currency derivative instruments are primarily entered into with major financial institutions. Our credit exposure under these arrangements is limited to agreements with a positive fair value at the reporting date. Credit risk with respect to the counterparties is actively monitored but is not considered significant since these transactions are executed with a diversified group of financial institutions.

Presented below is a description of our risks (foreign currency risk and interest rate risk) together with a sensitivity analysis, performed annually, of each of these risks based on selected changes in market rates and prices. These analyses reflect management's view of changes which are reasonably possible to occur over a one-year period. Also included is a description of our commodity price risk.

Foreign Currency Risk

A portion of our foreign currency risk is managed through the systematic use of foreign currency forward contracts. The use of these instruments supports the management of transactional exposures to exchange rate fluctuations as the gains or losses incurred on the derivative instruments will offset, in whole or in part, gains or losses on the underlying foreign currency exposure. We also utilize cross currency swaps and foreign denominated debt to hedge certain investments in foreign subsidiaries. The gain or loss on these instruments is recognized in other comprehensive income to offset the change in value of the net investments being hedged.

Foreign currency contracts and transactional exposures are sensitive to changes in foreign currency exchange rates. An annual test is performed to quantify the effects that possible changes in foreign currency exchange rates would have on annual operating profit based on our foreign currency contracts and transactional exposures at the current year-end. The balance sheet effect is calculated by multiplying each affiliate's net monetary asset or liability position by a 10 percent change in the foreign currency exchange rate versus the U.S. dollar.

As of December 31, 2020, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies involving balance sheet transactional exposures would not be material to our consolidated financial position, results of operations or cash flows. This hypothetical loss on transactional exposures is based on the difference between the December 31, 2020 rates and the assumed rates.

Our operations in Argentina are reported using highly inflationary accounting and their functional currency is the U.S. dollar. Changes in the value of an Argentine peso versus the U.S. dollar applied to our net peso monetary position are recorded in Other (income) and expense, net at the time of the change. As of December 31, 2020, K-C Argentina had a small net peso monetary position and a 10 percent unfavorable change in the exchange rate would not be material.

25 KIMBERLY-CLARK CORPORATION - 2020 Annual Report

The translation of the balance sheets of non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. Consequently, an annual test is performed to determine if changes in currency exchange rates would have a significant effect on the translation of the balance sheets of non-U.S. operations into U.S. dollars. These translation gains or losses are recorded as unrealized translation adjustments ("UTA") within stockholders' equity. The hypothetical change in UTA is calculated by multiplying the net assets of these non-U.S. operations by a 10 percent change in the currency exchange rates. As of December 31, 2020, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of our foreign currency translation exposures would have reduced stockholders' equity by approximately $750. In the view of management, the above potential UTA adjustments resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position because they would not affect our cash flow.

Interest Rate Risk

Interest rate risk is managed through the maintenance of a portfolio of variable and fixed-rate debt composed of short and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. At December 31, 2020, the long-term debt portfolio was comprised of primarily fixed-rate debt. From time to time, we also hedge the anticipated issuance of fixed-rate debt and those contracts are designated as cash flow hedges.

In order to determine the impact of changes in interest rates on our financial position or future results of operations, we calculated the increase or decrease in the market value of fixed-rate debt using a 10 percent change in current market interest rates and the rates governing these instruments. At December 31, 2020, a 10 percent decrease in interest rates would have increased the fair value of fixed-rate debt by about $198, which would not have a significant impact on our financial statements as we do not record debt at fair value.

Commodity Price Risk

We are subject to commodity price risk, the most significant of which relates to the price of pulp. Selling prices of tissue products are influenced, in part, by the market price for pulp. As previously discussed under Item 1A, "Risk Factors," increases in pulp prices could adversely affect earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in pulp prices. In some instances, we utilize negotiated short-term contract structures, including fixed price contracts, to manage volatility for a portion of our commodity costs, but derivative instruments have not been used to manage these risks.

Our energy, manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions. As previously discussed under Item 1A, "Risk Factors," there can be no assurance we will be fully protected against substantial changes in the price or availability of energy sources. In addition, we are subject to price risk for utilities and manufacturing inputs, used in our manufacturing operations. Derivative instruments are used in accordance with our risk management policy to hedge a limited portion of the price risk.

26 KIMBERLY-CLARK CORPORATION - 2020 Annual Report

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

Year Ended December 31

(Millions of dollars, except per share amounts) 2020 2019 2018

Other (income) and expense, net (54) (210) 1

Nonoperating expense (70) (91) (163)

Income Before Income Taxes and Equity Interests 2,930 2,650 1,813

Share of net income of equity companies 142 123 103

Net income attributable to noncontrolling interests (44) (40) (35)

Net Income Attributable to Kimberly-Clark Corporation $ 2,352 $ 2,157 $ 1,410

Per Share Basis

Net Income Attributable to Kimberly-Clark Corporation

See notes to the consolidated financial statements.

27 KIMBERLY-CLARK CORPORATION - 2020 Annual Report

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31

Other Comprehensive Income (Loss), Net of Tax

Unrealized currency translation adjustments 129 19 (428)

Employee postretirement benefits 37 12 140

Total Other Comprehensive Income (Loss), Net of Tax 132 (3) (237)

Comprehensive income attributable to noncontrolling interests (55) (31) (22)

See notes to the consolidated financial statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31

ASSETS

Current Assets

Cash and cash equivalents $ 303 $ 442

Property, Plant and Equipment, Net 8,042 7,450

Investments in Equity Companies 300 268

Other Intangible Assets, Net 832 29

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Debt payable within one year $ 486 $ 1,534

Accrued expenses and other current liabilities 2,262 1,978

Noncurrent Employee Benefits 864 897

Redeemable Preferred Securities of Subsidiaries 28 29

Stockholders' Equity

Kimberly-Clark Corporation

Preferred stock - no par value - authorized 20.0 million shares, none issued — —

Additional paid-in capital 657 556

Accumulated other comprehensive income (loss) (3,172) (3,294)

Total Kimberly-Clark Corporation Stockholders' Equity 626 (33)

Noncontrolling Interests 243 227

Total Stockholders' Equity 869 194

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,523 $ 15,283

See notes to the consolidated financial statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Shares Amount Shares Amount

Stock-based awards exercised or vested — — (90) (1,351) 152 — — — 62

Recognition of stock-based compensation — — 39 — — — — — 39

Dividends declared ($4.00 per share) — — — — — (1,391) — (32) (1,423)

Stock-based awards exercised or vested — — (93) (2,817) 322 — — — 229

Recognition of stock-based compensation — — 94 — — — — — 94

Dividends declared ($4.12 per share) — — — — — (1,415) — (42) (1,457)

Other — — 7 — — (3) (1) 1 4

Stock-based awards exercised or vested — — (55) (2,339) 271 — — — 216

Recognition of stock-based compensation — — 142 — — — — — 142

Dividends declared ($4.28 per share) — — — — — (1,458) — (36) (1,494)

See notes to the consolidated financial statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

Year Ended December 31

Operating Activities

Asset impairments 17 — 74

Deferred income taxes 45 29 2

Net (gains) losses on asset dispositions 68 (193) 52

Equity companies' earnings (in excess of) less than dividends paid (30) (6) 18

Postretirement benefits (28) 13 (25)

Investing Activities

Acquisition, net of cash acquired (1,083) (4) —

Proceeds from dispositions of property 31 242 51

Investments in time deposits (753) (568) (353)

Financing Activities

Proceeds from exercise of stock options 217 228 62

Acquisitions of common stock for the treasury (700) (800) (800)

Effect of Exchange Rate Changes on Cash and Cash Equivalents 4 1 (30)

Change in Cash and Cash Equivalents (139) (97) (77)

Cash and Cash Equivalents - Beginning of Year 442 539 616

Cash and Cash Equivalents - End of Year $ 303 $ 442 $ 539

See notes to the consolidated financial statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Accounting Policies

Basis of Presentation

The consolidated financial statements present the accounts of Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest as if they were a single economic entity in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany transactions and accounts are eliminated in consolidation. The terms "Corporation," "Kimberly-Clark," "we," "our," and "us" refer to Kimberly-Clark Corporation and all subsidiaries in which it has a controlling financial interest. Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in these estimates are recorded when known. Estimates are used in accounting for, among other things, sales incentives and trade promotion allowances, employee postretirement benefits, and deferred income taxes and potential assessments.

Cash Equivalents

Cash equivalents are short-term investments with an original maturity date of three months or less.

Inventories and Distribution Costs

Most U.S. inventories are valued at the lower of cost, using the Last-In, First-Out ("LIFO") method, or market. The balance of the U.S. inventories and inventories of consolidated operations outside the U.S. are valued at the lower of cost or net realizable value using either the First-In, First-Out ("FIFO") or weighted-average cost methods. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Distribution costs are classified as cost of products sold.

Property and Depreciation

Property, plant and equipment are stated at cost and are depreciated on the straight-line method. Buildings are depreciated over their estimated useful lives, primarily 40 years. Machinery and equipment are depreciated over their estimated useful lives, primarily ranging from 16 to 20 years. Purchases of computer software, including external costs and certain internal costs (including payroll and payroll-related costs of employees) directly associated with developing significant computer software applications for internal use, are capitalized. Computer software costs are amortized on the straight-line method over the estimated useful life of the software, which generally does not exceed 5 years.

Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group, which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using discounted cash flows or independent appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss on the transaction is included in income.

Goodwill and Other Intangible Assets

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not amortized, but rather is assessed for impairment annually and whenever events and circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit carrying amount, including goodwill, with its fair value. If the reporting unit carrying amount, including goodwill, exceeds its fair value, a goodwill impairment charge for the excess amount above fair value would be recorded. In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as macroeconomic, industry and competitive conditions, legal and regulatory environments, historical and

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projected financial performance, significant changes in the reporting unit and the magnitude of excess fair value over carrying amount from the previous quantitative impairment testing. If the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test using discounted cash flows to estimate fair value must be performed. On the other hand, if the qualitative assessment determines that it is more likely than not that the fair value of a reporting unit is more than its carrying value, then further quantitative testing is not required. For 2020, we completed the required annual assessment of goodwill for impairment for all of our reporting units using a qualitative assessment as of the first day of the third quarter, and we determined that it is more likely than not that the fair value is more than the carrying amount for each of our reporting units.

Indefinite-lived intangible assets, other than goodwill, consist of certain brand names related to our acquisition of Softex Indonesia and are tested for impairment annually at the same time as our goodwill impairment assessment and whenever events and circumstances indicate that impairment may have occurred. Our estimate of the fair value of our brand assets is based on a discounted cash flow model and a market-based approach using inputs which include projected revenues from our long-range plan, assumed royalty rates that could be payable if we did not own the brands, and a discount rate.

Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use of the asset are less than its carrying amount.An impairment loss would be measured as the difference between the fair value (based on discounted future cash flows) and the carrying amount of the asset. Estimated useful lives range from 10 to 20 years for trademarks and 15 to 20 years for certain acquired distributor and customer relationships.

Investments in Equity Companies

Investments in companies which we do not control but over which we have the ability to exercise significant influence and that, in general, are at least 20 percent-owned by us, are stated at cost plus equity in undistributed net income. These investments are evaluated for impairment when warranted. An impairment loss would be recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other than temporary. In judging "other than temporary," we would consider the length of time and extent to which the fair value of the equity company investment has been less than the carrying amount, the near-term and longer-term operating and financial prospects of the equity company, and our longer-term intent of retaining the investment in the equity company.

Revenue Recognition

Sales revenue is recognized at the time of product shipment or delivery, depending on when control passes, to unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and collection is reasonably assured. Sales are reported net of returns, consumer and trade promotions, rebates and freight allowed. Taxes imposed by governmental authorities on our revenue-producing activities with customers, such as sales taxes and value-added taxes, are excluded from net sales.

Sales Incentives and Trade Promotion Allowances

The cost of promotion activities provided to customers is classified as a reduction in sales revenue. In addition, the estimated redemption value of consumer coupons and related expense are recorded when the related revenue from customers is realized. Rebate and promotion accruals are based on estimates of the quantity of customer sales. Promotion accruals also consider estimates of the number of consumer coupons that will be redeemed and timing and costs of activities within the promotional programs.

Advertising Expense

Advertising costs are expensed in the year the related advertisement or campaign is first presented through traditional or digital media. For interim reporting purposes, advertising expenses are charged to operations as a percentage of sales based on estimated sales and related advertising expense for the full year.

Research Expense

Research and development costs are charged to expense as incurred.

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Other Income

Certain amounts not directly associated with the current operations of the business are recorded in Other (income) and expense, net. In the fourth quarter of 2020, we received a favorable legal ruling that resolved certain matters related to prior years’ business taxes in Brazil. These matters involved the revenue base, which included value added taxes, used to calculate and pay social security taxes for the period 2004 to 2014. In the legal ruling, the São Paulo State Court recognized our right to exclude the value added taxes from the revenue base used to calculate those social security taxes. This decision resulted in business tax credits being recognized of $77 that we expect to use by the end of 2024.

In the fourth quarter of 2019, gains of $194 on the sales of manufacturing facilities and associated real estate which were disposed of as part of the restructuring were recorded. See Note 2. Also, in the fourth quarter of 2019, we recognized a gain of $31 on the sale of property associated with a former manufacturing facility that was closed in 2012 as part of a past restructuring.

Foreign Currency Translation

The income statements of foreign operations, other than those in highly inflationary economies, are translated into U.S. dollars at rates of exchange in effect each month. The balance sheets of these operations are translated at period-end exchange rates, and the differences from historical exchange rates are reflected in stockholders' equity as unrealized translation adjustments.

As of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiaries in Argentina (“K-C Argentina”). 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 December 31, 2020, 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 in 2020, 2019 and 2018.

Derivative Instruments and Hedging

Our policies allow the use of derivatives for risk management purposes and prohibit their use for speculation. Our policies also prohibit the use of any leveraged derivative instrument. Consistent with our policies, foreign currency derivative instruments, interest rate swaps and locks, and the majority of commodity hedging contracts are entered into with major financial institutions. At inception, we formally designate certain derivatives as cash flow, fair value or net investment hedges and establish how the effectiveness of these hedges will be assessed and measured. This process links the derivatives to the transactions or financial balances they are hedging. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings as they occur. All derivative instruments are recorded as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are either recorded in the income statement or other comprehensive income, as appropriate. The gain or loss on derivatives designated as fair value hedges and the offsetting loss or gain on the hedged item attributable to the hedged risk are included in income in the period that changes in fair value occur. The gain or loss on derivatives designated as cash flow hedges is included in other comprehensive income in the period that changes in fair value occur, and is reclassified to income in the same period that the hedged item affects income. The gain or loss on derivatives designated as hedges of investments in foreign subsidiaries is recognized in other comprehensive income to offset the change in value of the net investments being hedged. Certain foreign-currency derivative instruments not designated as hedging instruments have been entered into to manage certain non-functional currency denominated monetary assets and liabilities. The gain or loss on these derivatives is included in income in the period that changes in their fair values occur. Cash flows from derivatives are classified within the consolidated statement of cash flows in the same category as the items being hedged. Cash flows from derivatives are classified within Operating Activities, except for derivatives designated as net investment hedges which are classified in Investing Activities. See Note 11 for disclosures about derivative instruments and hedging activities.

Leases

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

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Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

Certain lease agreements with lease and nonlease components are combined as a single lease component. The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Accounting Standards - Adopted During 2020

The Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). We adopted this standard as of January 1, 2020 on a prospective basis. The effects of this standard on our financial position, results of operations and cash flows were not material.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01 to further clarify the scope of this guidance. The effects of these standards on our financial position, results of operations and cash flows are not expected to be material.

Accounting Standards Issued - Not Adopted as of December 31, 2020

In 2019, the FASB issued ASU 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 approximately 10 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 all of our business segments and our organizations in all major geographies. Workforce reductions are now 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 $2.0 billion to $2.1 billion pre-tax ($1.5 billion to $1.6 billion after tax). Cash costs are expected to be $1.1 billion to $1.15 billion, primarily related to workforce reductions. Non-cash charges are expected to be $900 to $950 pre-tax and will primarily consist of incremental depreciation, asset write-offs and pension settlement and curtailment charges. Restructuring charges in 2021 are expected to be $180 to $280 pre-tax ($135 to $215 after tax).

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

Year Ended December 31

Cost of products sold:

Charges for workforce reductions $ 10 $ 31 $ 149

Asset impairments 17 — 74

Marketing, research and general expenses:

Charges for workforce reductions 13 (12) 243

Other (income) and expense, net(a) (9) (194) (12)

Provision for income taxes (94) (118) (243)

Net impact related to equity companies and noncontrolling interests (2) — (10)

Net charges attributable to Kimberly-Clark Corporation $ 323 $ 248 $ 783

(a)Other (income) and expense, net in 2019 was the result of pre-tax gains on the sales of manufacturing facilities and associated real estate which were disposed of as part of the restructuring.

(b)Represents non-cash pension settlement and curtailment charges resulting from restructuring actions, primarily in the U.S., United Kingdom and Canada.

The measurement of the asset impairment charges was based on the excess of the carrying values of the impacted asset groups over their fair values. These fair values were measured by using discounted cash flows expected over the limited time the assets would remain in use or the expected sales value, and as a result, the assets were essentially written off or written down to fair value less costs to sell. The use of discounted cash flows represents a level 3 measure under the fair value hierarchy.

The following summarizes the restructuring liabilities activity:

Restructuring liabilities at January 1 $ 132 $ 210

Charges for workforce reductions and other cash exit costs 210 221

Currency and other — 3

Restructuring liabilities at December 31 $ 93 $ 132

As of December 31, 2020 and 2019, restructuring liabilities of $73 and $93 are recorded in Accrued expenses and other current liabilities and $20 and $39 are recorded in Other Liabilities, respectively. The impact related to restructuring charges is recorded in Operating working capital and Other Operating Activities, as appropriate, in our consolidated cash flow statement.

Through December 31, 2020, cumulative pre-tax charges for the 2018 Global Restructuring Program were $1.8 billion ($1.4 billion after tax).

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Note 3. Acquisition

On October 1, 2020 (“Acquisition Date”), we acquired Softex Indonesia, a leader in the fast-growing Indonesian personal care market, in an all-cash transaction for approximately $1.2 billion. The transaction price is subject to finalization of working capital and net debt adjustments which 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. This transaction significantly expands our presence in an important developing and emerging market and is a strong strategic fit with our core business. Softex Indonesia generated net sales of approximately $420 in 2019. We financed the transaction through a combination of short-term commercial paper, cash on hand, and the issuance of a $600 bond. During the year ended December 31, 2020, we recorded transaction and integration costs of $32 in Marketing, research and general expenses.

We consolidated Softex Indonesia into our financial statements beginning in the fourth quarter of 2020. We have substantially completed an initial purchase price allocation in which we utilized several generally accepted valuation methodologies to determine the fair value of certain acquired assets. The primary valuation methods included the replacement cost approach, sales comparison approach, discounted cash flow, multi-period excess earnings, relief from royalty and distributor methods. These valuation methodologies are commonly used to value similar tangible and identifiable intangible assets in the Consumer Packaged Goods industry. All of the selected valuation methodologies incorporate unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy in ASC 820, Fair Value Measurements. In connection with these valuation methodologies, we are required to make estimates and assumptions regarding market comparables, revenue growth rates, operating margins, distributor and customer attrition rates, royalty rates, distributor margins and discount rates, which are primarily based on cash flow forecasts, business plans, economic projections, and other information available to market participants.

The total purchase price consideration was allocated to the net assets acquired based upon their respective estimated fair values as follows:

Cash and cash equivalents $ 9

Accounts receivables, net 97

Inventories 42

Other current assets 12

Other Intangible Assets 757

Property, Plant and Equipment, Net 196

Other assets 2

Accrued expenses and other current liabilities (109)

Deferred income taxes (152)

Other liabilities (139)

Fair value of net assets acquired $ 1,105

Acquired intangible assets other than goodwill include certain brand names of $637, which are considered to have indefinite useful lives, and other brand names and distributor and customer relationships of $120, which have estimated useful lives of 15 to 20 years. Goodwill of $390 was allocated to the Personal Care business segment. The goodwill is primarily attributable to future growth opportunities and any intangible assets that did not qualify for separate recognition. While the goodwill is not deductible for local tax purposes, it is treated as an amortizable expense for the U.S. global intangible low-taxed income ("GILTI") computation.

Based on the carrying values of the finite-lived intangible assets as of December 31, 2020, amortization expense for each of the next five years is estimated to be approximately $7.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above. 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.

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The consolidated results of operations for Softex Indonesia are reported primarily in our Personal Care business segment on a one-month lag. As such, Softex Indonesia’s results of operations from the Acquisition Date through November 30, 2020 are included in our consolidated results of operations for the year ended December 31, 2020. The impact of the acquisition on our consolidated results of operations for the year ended December 31, 2020 was not significant.

Pro forma results of operations have not been presented as the impact on our consolidated financial statements is not material.

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 2020 and 2019, 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 December 31, 2020 and 2019, derivative assets were $44 and $34, respectively, and derivative liabilities were $92 and $44, 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. See Note 11 for additional information on our use of derivative instruments.

Redeemable preferred securities of subsidiaries are measured on a recurring basis at fair value and were $28 and $29 at December 31, 2020 and 2019, respectively. They are not traded in active markets. As of December 31, 2020, 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 and $76 at December 31, 2020 and 2019, 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.

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

Assets

Liabilities

(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. Debt and Redeemable Preferred Securities of Subsidiaries

Long-term debt is composed of the following:

Weighted-AverageInterestRate Maturities December 31

Bank loans and other financings in various currencies 6.3% 2021 - 2039 75 54

Scheduled maturities of long-term debt for the next five years are $265 in 2021, $314 in 2022, $475 in 2023, $618 in 2024 and $557 in 2025.

In September 2020, we issued $600 aggregate principal amount of 1.05% notes due September 15, 2027. Proceeds from the offering together with cash on hand and borrowings under our commercial paper program were used to fund the acquisition of Softex Indonesia.

In March 2020, we issued $750 aggregate principal amount of 3.10% notes due March 26, 2030. Proceeds from the offering were used for general corporate purposes including the repayment of a portion of our commercial paper indebtedness.

In February 2020, we issued $500 aggregate principal amount of 2.875% notes due February 7, 2050. Proceeds from the offering were used for general corporate purposes including the repayment of a portion of our commercial paper indebtedness.

In April 2019, we issued $700 aggregate principal amount of 3.20% notes due April 25, 2029. Proceeds from the offering were used for general corporate purposes, including the repayment of a portion of our outstanding commercial paper indebtedness.

In October 2018, we issued $500 aggregate principal amount of 3.95% notes due November 1, 2028. Proceeds from the offering were used for general corporate purposes, including repayment of a portion of our outstanding commercial paper indebtedness.

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We maintain a $2.0 billion revolving credit facility which expires in June 2023 and a $750 revolving credit facility which expires in June 2021. These facilities, currently unused, support our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason.

Our subsidiary in Central America has outstanding redeemable preferred securities that are held by a noncontrolling interest.

Note 6. Stock-Based Compensation

We have a stock-based Equity Participation Plan and an Outside Directors' Compensation Plan (the "Plans"), under which we can grant stock options, restricted shares and restricted share units to employees and outside directors. As of December 31, 2020, the number of shares of common stock available for grants under the Plans aggregated 11 million shares.

Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant, and they have a term of 10 years. Stock options are subject to graded vesting whereby options vest 30 percent at the end of each of the first two 12-month periods following the grant and 40 percent at the end of the third 12-month period.

Restricted shares, time-vested restricted share units and performance-based restricted share units granted to employees are valued at the closing market price of our common stock on the grant date and vest generally at the end of three years. The number of performance-based share units that ultimately vest ranges from zero to 200 percent of the number granted, based on performance tied to return on invested capital ("ROIC") and net sales during the three-year performance period. ROIC and net sales targets are set at the beginning of the performance period. Restricted share units granted to outside directors are valued at the closing market price of our common stock on the grant date and vest when they are granted. The restricted period begins on the date of grant and expires on the date the outside director retires from or otherwise terminates service on our Board.

At the time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units on the same date and at the same rate as dividends are paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings.

Stock-based compensation costs of $147, $96 and $41 and related deferred income tax benefits of $32, $11 and $13 were recognized for 2020, 2019 and 2018, respectively.

The fair value of stock option awards was determined using a Black-Scholes-Merton option-pricing model utilizing a range of assumptions related to dividend yield, volatility, risk-free interest rate, and employee exercise behavior. Dividend yield is based on historical experience and expected future dividend actions. Expected volatility is based on a blend of historical volatility and implied volatility from traded options on Kimberly-Clark's common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate forfeitures based on historical data.

The weighted-average fair value of options granted was estimated at $15.92, $13.54 and $13.56, in 2020, 2019 and 2018, respectively, per option on the date of grant based on the following assumptions:

Year Ended December 31

Dividend yield 3.3 % 3.3 % 3.9 %

Risk-free interest rate 0.3 % 2.3 % 2.8 %

Expected life - years 4.5 4.6 4.6

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Total remaining unrecognized compensation costs and amortization period are as follows:

December 31, 2020 Weighted-AverageService Years

Stock options $ 15 1.3

Restricted shares and time-vested restricted share units 12 1.5

Performance-based restricted share units 82 1.8

A summary of stock-based compensation is presented below:

The total intrinsic value of options exercised during 2020, 2019 and 2018 was $62, $62 and $22, respectively.

Time-VestedRestricted Share Units Performance-BasedRestricted Share Units

The total fair value of restricted share units that were distributed to participants during 2020, 2019 and 2018 was $62, $75 and $65, respectively.

Note 7. Employee Postretirement Benefits

Substantially all regular employees in the U.S. and the United Kingdom are covered by defined contribution retirement plans and certain U.S. and United Kingdom employees previously earned benefits covered by defined benefit pension plans that currently provide no future service benefit (the "Principal Plans"). Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for our qualified defined benefit pension plans is to contribute assets at least equal in amount to regulatory minimum requirements. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded.

Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. The annual increase in the consolidated weighted-average health care cost trend rate is expected to be 5.5 percent in 2021 and to decline to 4.5 percent in 2029 and thereafter. Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans.

As a result of restructuring actions related to the 2018 Global Restructuring Program, aggregate pension settlement charges of $49 and $46 during 2020 and 2019 and a curtailment gain of $1 during 2019 were recognized in Nonoperating expense,

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respectively, primarily related to the defined benefit pension plans in the U.S., United Kingdom and Canada (see Note 2 for further information about the 2018 Global Restructuring Program).

Summarized financial information about postretirement plans, excluding defined contribution retirement plans, is presented below:

Pension Benefits Other Benefits

Year Ended December 31

Change in Benefit Obligation

Benefit payments from plans (169) (142) — —

Direct benefit payments (8) (10) (47) (52)

Settlements and curtailments (113) (127) — —

Change in Plan Assets

Fair value of plan assets at beginning of year 3,803 3,398 — —

Actual return on plan assets 489 572 — —

Employer contributions 40 50 — —

Currency and other 120 51 — —

Benefit payments (169) (142) — —

Settlements (90) (126) — —

Fair value of plan assets at end of year 4,193 3,803 — —

(a) The actuarial net losses in 2020 and 2019 were primarily due to discount rate decreases in 2020 and 2019.

Substantially all of the funded status of pension and other benefits is recognized in the consolidated balance sheet in Noncurrent Employee Benefits, with the remainder recognized in Accrued Expenses and other current liabilities and Other Assets.

Information for the Principal Plans and All Other Pension Plans

Principal Plans All OtherPension Plans Total

Year Ended December 31

Approximately one-half of the PBO and fair value of plan assets for the Principal Plans relate to the U.S. qualified and nonqualified pension plans.

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Information for Pension Plans with an ABO in Excess of Plan Assets

December 31

Information for Pension Plans with a PBO in Excess of Plan Assets

December 31

Components of Net Periodic Benefit Cost

Pension Benefits Other Benefits

Year Ended December 31

Expected return on plan assets(a) (134) (144) (166) — — —

Recognized net actuarial loss 42 44 47 1 — 1

Settlements and curtailments 49 45 136 — — —

(a)The expected return on plan assets is determined by multiplying the fair value of plan assets at the remeasurement date, typically the prior year-end adjusted for estimated current year cash benefit payments and contributions, by the expected long-term rate of return.

The components of net periodic benefit cost other than the service cost component are included in the line item Nonoperating expense in our consolidated income statement.

Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31

Pension Benefits Other Benefits

Expected long-term return on plan assets 3.41 % 3.66 % 4.39 % 4.50 % — — —

Rate of compensation increase 3.07 % 3.08 % 3.08 % 2.27 % — — —

Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31

Pension Benefits Other Benefits

Rate of compensation increase 3.07 % 3.08 % — —

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Investment Strategies for the Principal Plans

Strategic asset allocation decisions are made considering several risk factors, including plan participants' retirement benefit security, the estimated payments of the associated liabilities, the plan funded status, and Kimberly-Clark's financial condition. The resulting strategic asset allocation is a diversified blend of equity and fixed income investments. Equity investments are typically diversified across geographies and market capitalization. Fixed income investments are diversified across multiple sectors including government issues and corporate debt instruments with a portfolio duration that is consistent with the estimated payment of the associated liability. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. Our 2021 target plan asset allocation for the Principal Plans is approximately 85 percent fixed income securities and 15 percent equity securities.

The expected long-term rate of return is generally evaluated on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was 3.76 percent in 2020, 4.59 percent in 2019 and 4.75 percent in 2018, and will be 3.51 percent in 2021.

Set forth below are the pension plan assets of the Principal Plans measured at fair value, by level in the fair-value hierarchy. More than 70 percent of the assets are held in pooled funds and are measured using a net asset value (or its equivalent). Accordingly, such assets do not meet the Level 1, Level 2, or Level 3 criteria of the fair value hierarchy.

Fair Value Measurements at December 31, 2020

Cash and Cash Equivalents

Held directly $ 56 $ 56 $ — $ —

Held through mutual and pooled funds measured at net asset value 15 — — —

Fixed Income

Held directly

U.S. government and municipals 191 171 20 —

U.S. corporate debt 310 — 310 —

International bonds 42 — 42 —

Held through mutual and pooled funds measured at net asset value

U.S. government and municipals 167 — — —

U.S. corporate debt 730 — — —

International bonds 1,062 — — —

Equity

Held directly

U.S. equity 18 18 — —

International equity 31 31 — —

Held through mutual and pooled funds measured at net asset value

Non-U.S. equity 107 — — —

Global equity 517 — — —

Insurance Contracts 380 — — 380

Other 1 1 — —

Futures contracts are used when appropriate to manage duration targets. As of December 31, 2020 and 2019, the U.S. plan held directly Treasury futures contracts with a total notional value of approximately $396 and $345, respectively, and an

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insignificant fair value. As of December 31, 2020 and 2019, the United Kingdom plan held through a pooled fund future contracts with a total notional value of approximately $454 and $346, and an insignificant fair value.

During 2020 and 2019, the plan assets did not include a significant amount of Kimberly-Clark common stock.

Fair Value Measurements at December 31, 2019

Cash and Cash Equivalents

Held directly $ 44 $ 44 $ — $ —

Held through mutual and pooled funds measured at net asset value 31 — — —

Fixed Income

Held directly

U.S. government and municipals 161 147 14 —

U.S. corporate debt 221 — 221 —

International bonds 9 — 9 —

Held through mutual and pooled funds measured at net asset value

U.S. government and municipals 153 — — —

U.S. corporate debt 662 — — —

International bonds 937 — — —

Equity

Held directly

U.S. equity 39 39 — —

International equity 32 32 — —

Held through mutual and pooled funds measured at net asset value

Non-U.S. equity 86 — — —

Global equity 572 — — —

Insurance Contracts 372 — — 372

Other (16) (4) — —

Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. Substantially all of the equity securities held directly by the plans are actively traded and fair values are determined based on quoted market prices. Fair values of U.S. government securities are determined based on trading activity in the marketplace.

Fair values of U.S. corporate debt, U.S. municipals and international bonds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations.

Fair values of equity securities and fixed income securities held through units of pooled funds are based on net asset value of the units of the pooled fund determined by the fund manager. Pooled funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors. The fair value of pooled funds is determined by the value of the underlying assets held by the fund and the units outstanding.

Equity securities held directly by the pension trusts and those held through units in pooled funds are monitored as to issuer and industry. Except for U.S. Treasuries, concentrations of fixed income securities are similarly monitored for concentrations by issuer and industry. As of December 31, 2020, there were no significant concentrations of equity or debt securities in any single issuer or industry.

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No level 3 transfers (in or out) were made in 2020 or 2019. Fair values of insurance contracts are based on an evaluation of various factors, including purchase price.

We expect to contribute approximately $50 to our defined benefit pension plans in 2021. Over the next ten years, we expect that the following gross benefit payments will occur:

Pension Benefits Other Benefits

Defined Contribution Pension Plans

Our 401(k) profit sharing plan and supplemental plan provide for a matching contribution of a U.S. employee's contributions and accruals, subject to predetermined limits, as well as a discretionary profit sharing contribution, in which contributions will be based on our profit performance. We also have defined contribution pension plans for certain employees outside the U.S. Costs charged to expense for our defined contribution pension plans were $141 in 2020, $131 in 2019, and $120 in 2018. Approximately 25 percent of these costs were for plans outside the U.S.

Note 8. Stockholders' Equity

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

Other comprehensive income (loss) before reclassifications 26 (27) (24) (22)

(Income) loss reclassified from AOCI — 65 (a) (1) (a) (12)

Net current period other comprehensive income (loss) 26 38 (25) (34)

Other comprehensive income (loss) before reclassifications 114 4 (26) (31)

(Income) loss reclassified from AOCI — 63 (a) (1) (a) (1)

Net current period other comprehensive income (loss) 114 67 (27) (32)

(a) Included in computation of net periodic pension and other postretirement benefits costs (see Note 7).

Included in the above defined benefit pension plans and other postretirement benefit plans balances as of December 31, 2020 is $958 and $6 of unrecognized net actuarial loss and unrecognized net prior service credit, respectively.

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

Year Ended December 31