Tuesday, April 23, 2019

Earlier this month we had a post reviewing Corporate America’s restructuring costs, including a list of the largest restructuring costs that various companies have reported over the last three years.

This week we’re going to walk through the details of one specific restructuring project. With Calcbench’s Interactive Disclosure Tool you can do that, to see whether a restructuring effort is growing larger or smaller over the years.

Our example is Kimberly Clark Corp. ($KMB). Why? Partly because Kimberly reported more restructuring costs in 2018 than any other firm in the S&P 500, when it disclosed $4.18 billion in costs. A significant chunk of that amount was due to a global restructuring program Kimberly announced in January 2018.

Well, Kimberly Clark just filed its first-quarter 2019 report this week. That gives us the chance to look back at four quarters’ worth of restructuring costs since the plan was announced.

Comparing Notes

The actual comparing of one period’s disclosure to another is easy. First, find the disclosure you want in the Interactive Disclosure Tool. In this case, we’re studying Kimberley’s “Exit or Disposal Cost Obligations,” although other firms might sometimes call this “Restructuring” or some similar name. Then you’ll see several tabs immediately above that disclosure: Add Previous Period, Show All History, and Compare to Previous Period.

Select the tab you want. Calcbench will then pull up the same disclosure for those prior periods. That’s all there is to it.

We first chose Compare to Previous Period. At the top of that second column you see a color-coded key: text shaded in red was in the previous filing, but deleted from the current document; text shaded in green was not in the previous filing, and added to the current filing. Take a look at Figure 1, below.

Some caveats: when you select Compare to Previous Period, you are reviewing changes to the text, rather than seeing the previous period’s actual filing. That’s why the text in the comparison column looks different, and the numerical values in that column aren’t tagged so you can trace them. You aren’t looking at Kimberly Clark’s actual Q1-2018 filing; you’re looking at a color-coded analysis of how that text differs from the Q1-2019 filing.

If you want to compare actual filings — that is, line them up in a more readable format for all — then you’re better served selecting the Add Previous Period or or Show All History tabs. They won’t give you the color-coded passages to see what’s changed, but they do let you line up the disclosures so you can bounce back and forth more easily.

See Figure 2, below. It shows the quarterly costs of Kimberly’s 2018 restructuring program for the most recent three quarters — but that’s only because we don’t have the space to show more. In the Interactive Disclosure Tool, you can scroll backward through time, to the start of the 2018 restructuring program and even earlier quarters before that, when Kimberly was disclosing costs related to a 2014 restructuring program.

What the Numbers Say

Start with Kimberly Clark’s original disclosure 12 months ago, when it first reported the 2018 restructuring plan and expected costs: “Workforce reductions are expected to be in the range of 5,000 to 5,500… Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax.”

Then came a breakdown of Q1-2018 restructuring costs in table format, which said net charges that quarter were $428 million — roughly $577 million in real charges, offset by $149 million in lower taxes and other offsets.

That was first quarter of 2018. Then you can scroll back and forth across other filings from 2018, to see how the totals keep changing. Kimberly does a good job with the disclosure, providing a breakdown of restructuring costs in more than a dozen line items, for both the period in question and year-to-date cumulative costs. See Figure 3, below.

Total costs related to this restructuring project were $1.036 billion, below the $1.2 billion estimate the company gave at the start of that year. In the Q1-2019 filing submitted this week, Kimberly estimates that 2019 costs will be $600 million to $750 million pre-tax.

How will Kimberly-Clark manage its restructuring oversight in 2019? Will it hit that goal or, like 2018, even finish below that number? We can revisit the issue 12 months from now — and with the Interactive Disclosure tool, also keep tabs on data along the way.

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