Kimberly-Clark Corporation (KMB) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Kimberly-Clark Corporation. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Mike Hsu, Chairman of the Board and Chief Executive Officer. Mr. Hsu, the floor is yours.

Good morning, and welcome to Kimberly-Clark's Annual Meeting. We join you today during an unprecedented time, and we hope all of our stakeholders are staying healthy and safe. Now before we begin the business portion of the meeting, I did want to take a minute to talk about our response to COVID-19. The COVID-19 crisis is severely affecting individuals and society at large, and it's forcing companies like ours to adapt to overcome near-term operating challenges and uncertainty. Kimberly-Clark's vision is to provide the world with essentials for a better life. We know our consumers are counting on us, now more than ever, to fulfill that vision. We take this responsibility seriously. Our teams are working around the clock to ensure our essential products get to our consumers who depend on us. The K-C Foundation and our brands have launched programs to support COVID-19 relief efforts. And thus far, we provided donations of more than $8 million to organizations, including UNICEF, the Red Cross and the United Way. We're also donating millions and millions of our products to other organizations in need. Since the outbreak of COVID-19, we've taken decisive action to manage our business effectively through this crisis. We've established 3 key operating priorities: Priority #1, protect the health and safety of our employees and our consumers. Throughout our 148-year history, this has never been more important than right now. We've taken precautionary measures to protect our employees around the world, no matter where they work. Priority #2, proactively manage our global supply chain to ensure supply of our essential products to our consumers. Our supply chain teams are meeting multiple times each day to effectively navigate the dynamic environment. They're doing a great job in keeping our global supply chain largely operational, in many cases, delivering record output. The supply chain environment is dynamic, and we expect ongoing challenges in the near term, however, we're encouraged with our team's ability thus far to manage effectively in the current environment. Priority #3, prudently manage the business through near-term volatility while continuing to strengthen the long-term health of Kimberly-Clark. We'll continue to operate with a balanced perspective on both the top and bottom line as we assess risk and opportunity. We'll continue to invest in our products, our brands and our commercial capabilities to maintain the near-term health of our business and position us for long-term success. And we've taken additional steps to further strengthen our balance sheet and enhance our financial flexibility. While the environment continues to evolve rapidly, our teams are managing our priorities and our business well. I'm extremely proud of our entire K-C team and want to express sincere thanks for how they are fulfilling our vision. And now I'd like to introduce Jeff Melucci, our General Counsel, who will serve as the secretary for today's meeting.

Thanks, Mike. Good morning, everyone, and welcome to our annual meeting. Today marks K-C's first-ever virtual meeting of stockholders, which is being conducted as a live webcast. Through the meeting portal, you will find our agenda and rules of conduct. And the portal also has links to our annual report and our proxy materials for the meeting. A representative from our Inspector of Election is in attendance and has confirmed that a quorum is present. Regarding voting, if you have not voted or if you wish to change your vote, you may do so during the meeting by clicking the link provided online. Any stockholder who has already voted and does not want to change his or her vote, need not take any further action at this time. We will accept votes until the polls close later in the meeting. Now regarding questions, feel free to ask a question at any time during the meeting by clicking the message icon in the upper right-hand corner of the screen. We will respond to questions and comments later in the meeting, following Mike's business presentation. Regarding the business presentation, it will include forward-looking statements and will discuss certain financial measures that have not been calculated in accordance with generally accepted accounting principles. Please see the meeting rules of conduct for more information on these matters. Now for the presentation of the proposals. We have 4 proposals for this meeting: Number one, the election of 11 directors; two, the ratification of our independent auditors; three, the approval of the compensation of our named executive officers; and four, a stockholder proposal regarding the right to act by written consent. Each proposal is described in our 2020 proxy statement, and I will now ask for a motion that the 4 proposals listed on the agenda be approved.

Moved.

And I second the motion. Thank you. If you wish to vote at this meeting on these proposals, you may do so by clicking on the link provided online, and the polls are now officially open. [Voting]

Next, I will introduce our director nominees who are all in attendance on today's call. Al Bru, Robert Decherd; Mike Hsu, our Chairman; Mae Jemison, Todd Maclin, Sheri McCoy, Christa Quarles, Ian Read, Dunia Shive, Mark Smucker and Mike White. Welcome, directors. I'd also like to take a moment to acknowledge Nancy Karch and Marc Shapiro. They're both retiring from the Board at the conclusion of this meeting. And I know I speak on behalf of management and the Board in thanking Nancy and Marc for their significant and long-lasting contributions to the Board, to the company and its shareholders. So thank you very much, Nancy and Marc, and congratulations. Next, I would like to introduce our independent auditor. Joining this meeting are representative of Deloitte & Touche, Sean Bronson, who is the partner in charge of our 2020 audit, is in attendance. Welcome, Sean. And now to present the stockholder proposal. The proponent of proposal #4 is Mr. James McRitchie, acting on behalf of Myra Young, who owns 50 shares of the company's common stock. Mr. McRitchie is connected into the webcast to offer a 3-minute statement in support of proposal #4. Operator, if you could please ensure Mr. McRitchie's line is open. Mr. McRitchie, please go ahead.

Okay. Yes, I'm presenting proposal #4 on behalf of my wife, Myra Young, the right to act by written consent. The proposal asks that our Board take the steps necessary to permit written consent by shareholders entitled to cast a minimum number of votes necessary to authorize action at a meeting at which all shareholders entitled to vote are present and voting consistent with applicable law. Many Boards and investors assume a false equivalency between rights of written consent and special meeting. However, any shareholder, regardless of how many or few shares she owns can seek to solicit written consent on a proposal. By contrast, calling a special meeting may require a 2-step process. If shareholder does not own the minimum shares required must first obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies asking shareholders to vote on the proposal to be presented at the special meeting. This 2-step process can take more time and expense than the 1-step process of soliciting written consent, especially at Kimberly-Clark, which allows investors with 25% of outstanding shares to call a special meeting, instead of 10% as allowed by many companies. Please vote for right to act by written consent, proposal #4 [Audio Gap] for the opportunity to present the proposal.

Thank you, Mr. McRitchie. The company's response to proposal #4 can be found on Page 88 of the proxy statement for this meeting. So now for the closing of the polls and the voting results, the polls are now officially closed. Based on preliminary results, the Inspector has advised me of the following: Number one, all 11 nominees have been elected to the Board; number two, our stockholders have approved the proposals to ratify our independent auditors and approved our executive compensation; and three, the stockholders did not approve the proposal regarding the right to act by written consent. We will announce final results in a Form 8-K filing with the SEC within 4 business days. And with that, Mike, I'll turn it back to you to provide a quick business update.

Okay. Thank you, Jeff. With the polls closed, I wanted to provide a short update on our recent performance. Kimberly-Clark has delivered more than $12 billion in cash dividends over the past 10 years. That's a top-tier dividend payout in our industry. It's the 86th consecutive year that K-C has paid a dividend, the 48th consecutive annual increase and the ninth consecutive year of returning at least $2 billion in cash to shareholders. We have a strong track record of creating shareholder value. In 2019, KMB outperformed the Consumer Staples Index and overall market performance. Through the first quarter of 2020, our stock price was down 6%, which likely reflects concerns about COVID-19, however, this does compare favorably to the broader market. We will continue to deploy a balanced approach to managing our business. We'll grow our portfolio of iconic brands by elevating and expanding our categories. We'll build on our strong legacy of cost and financial discipline. We'll continue to allocate capital in ways that create shareholder value. And we believe our balanced approach will yield sustainable growth. I'm proud to advise you that we continue to receive strong recognition for our stewardship of your company. We value being recognized for creating a diverse, inclusive and ethical workplace. Thank you. This concludes our annual business update, and we'll now consider questions or comments you may have about Kimberly-Clark. Jeff, has any questions been submitted?

We have no questions, Mike, in the queue.

Okay. Thank you for your continued support at Kimberly-Clark, and this annual meeting is adjourned.

This concludes the meeting. You may now disconnect.