2Q Net Sales Rose 8 Percent to a Record $4.5 Billion in 2007; GAAP-Basis
EPS Were $1.00 vs. $0.82 in 2006
Adjusted EPS Improved 9 Percent to $1.04 and Cash Provided by Operations
Increased 9 Percent
Company Boosts Adjusted EPS Guidance for the Full Year of 2007 to $4.20 to
$4.25 From Previous Range of $4.10 to $4.20
Company Also Signs $2.0 Billion Accelerated Share Repurchase Agreement and
Increases 2007 Share Repurchase Target to $2.8 Billion; Board Approves New
50 Million Share Repurchase Program
DALLAS, July 24 /PRNewswire-FirstCall/ -- Kimberly-Clark Corporation
(NYSE: KMB) today reported that net sales in the second quarter of 2007
increased 8.2 percent to $4.5 billion, establishing a new quarterly record
for the twelfth consecutive quarter. The improvement was broad-based, with
organic sales growth of 5 percent or better for the company's Personal
Care, Consumer Tissue and K-C Professional & Other businesses and continued
double-digit sales gains in developing and emerging markets. In addition,
changes in currency exchange rates benefited sales by about 3 percent.
Diluted net income per share was $1.00 compared with 82 cents in the
prior year. Adjusted earnings in the second quarter of 2007 were $1.04 per
share, up more than 9 percent from 95 cents per share in 2006 and slightly
above the company's previous guidance range of $1.01 to $1.03 per share.
The higher sales, along with continued success in reducing costs, enabled
the company to deliver a 7 percent increase in adjusted operating profit
for the quarter while increasing strategic marketing expenses by $13
million and absorbing approximately $85 million of cost inflation. A lower
effective tax rate also contributed to the bottom-line improvement versus
the year-ago period.
Adjusted earnings exclude charges for strategic cost reductions to
streamline the company's operations in both years and certain incremental
implementation costs related to the strategic cost reduction plan in 2007.
Further information about adjusted earnings and other non-GAAP financial
measures is provided on following pages.
The company also announced that it entered into an accelerated share
repurchase (ASR) agreement with Bank of America for the purchase of
approximately 29.6 million shares of Kimberly-Clark common stock at a cost
of $2.0 billion. Initial settlement of the ASR is expected to occur on or
about July 27, 2007, and Kimberly-Clark will fund the share repurchase with
incremental debt financing. Including the $2.0 billion ASR, the company's
new full year 2007 share repurchase target is $2.8 billion, up from its
original target of $600 to $800 million. The company's board of directors
has also approved the repurchase of an additional 50 million shares of
Kimberly-Clark common stock during the next several years, augmenting the
50 million share authorization from September 2005 that will be fully
completed upon execution of the ASR. The actual number of shares purchased
under the new share authorization and the timing of the transactions will
depend upon prevailing market conditions.
Chairman and Chief Executive Officer Thomas J. Falk said, "In the
second quarter, our teams continued to execute our Global Business Plan
well, highlighted by particularly strong top- and bottom-line performances
in Personal Care and across developing and emerging markets. As a result,
we again delivered on our commitments for growth in sales, adjusted
operating profit and adjusted earnings per share even though inflation has
continued to put pressure on our margins. I'm also encouraged by the
positive trends in cash provided by operations and return on invested
capital, as both of these key financial measures improved during the
quarter."
Commenting on the increase in share repurchases, Falk said, "Today's
announcements are a direct reflection of our confidence in our ability to
continue to deliver on the objectives of our Global Business Plan. With our
targeted growth initiatives and strong financial discipline, we have the
right strategies in place to drive sustainable growth. The additional
leverage aligns our capital structure with our Global Business Plan
strategies and, given our strong balance sheet and excellent cash flow,
leaves ample financial flexibility and access to capital for future
business needs. Moreover, we continue to believe our future earnings and
cash generation prospects make KMB shares an attractive investment."
Review of second quarter sales
The 8 percent growth in second quarter sales reflects higher sales
volumes of approximately 4 percent, along with a 1 percent rise in net
selling prices. Product mix was slightly better than the prior year, while
foreign currency effects added about 3 percent to sales.
Sales of personal care products climbed 9.7 percent in the second
quarter, driven primarily by a 6 percent increase in sales volumes and
currency benefits of 3 percent. Net selling prices and product mix both
improved slightly compared with the prior year.
Personal care sales in North America were up about 3 percent compared
with the second quarter of 2006, as sales volumes grew 2 percent and net
selling prices rose 1 percent. Product innovations contributed to solid
volume gains in the quarter for Huggies diapers and baby wipes and for
Poise and Depend incontinence care products. These increases were partially
offset by lower sales of child care and feminine care products. In child
care, sales volumes were down somewhat in comparison with a strong year-ago
period that benefited from the introduction of two key line extensions --
Pull-Ups training pants with Cool Alert and Pull-Ups Night*Time. Although
Kotex feminine care sales volumes decreased year-over-year, they were
similar to first quarter 2007 levels. In Europe, personal care sales
advanced more than 11 percent in the quarter, on favorable currency effects
of 9 percent and a 4 percent increase in sales volumes, partially offset by
a 2 percent decline in net selling prices. The volume growth was primarily
attributable to higher sales of Huggies diapers, up 5 percent in the
region's core markets -- the U.K., France, Italy and Spain. Customers and
consumers continued to respond positively to innovative Huggies Newborn and
Natural Fit diapers and Huggies Little Walkers diaper pants, launched in
the second half of 2006. In developing and emerging markets (D&E), personal
care sales jumped nearly 21 percent, driven by a 14 percent increase in
sales volumes and currency benefits of about 6 percent. All four D&E
regions posted double-digit volume gains, with particular strength
throughout most of Latin America and in Australia, South Korea, China and
Russia.
Sales of consumer tissue products improved 9.4 percent versus the
second quarter of 2006, as sales volumes and net selling prices moved
higher by approximately 3 percent and 2 percent, respectively, while
changes in foreign currency rates contributed an additional 4 percent.
In North America, second quarter sales of consumer tissue products
increased about 9 percent, boosted by 7 percent growth in sales volumes,
along with higher net selling prices and favorable product mix, each
approximately 1 percent better than the prior year. The volume gains were
paced by double-digit growth for Scott bathroom tissue and Viva paper
towels, behind product improvements and a stepped-up level of marketing
support. Volume comparisons for Kleenex facial tissue and Cottonelle
bathroom tissue also showed solid improvement, up mid single-digits, due in
part to the timing of promotional activities. In Europe, consumer tissue
sales rose about 8 percent, with currency effects accounting for the entire
increase. Product mix improved by 1 percent, offset by a 1 percent decrease
in sales volumes, as the company has shed low-margin business following the
sale or closure of certain facilities in the region. Consumer tissue sales
in developing and emerging markets increased more than 10 percent, with
growth in all regions. Net selling prices were about 6 percent higher in
response to higher raw materials costs and currency benefits also added
approximately 6 percent to sales, partially offset by a modest decline in
sales volume.
Sales of K-C Professional & other products advanced 8.4 percent
compared with the year-ago quarter. Sales volumes increased more than 4
percent, net selling prices were up about 1 percent and favorable currency
effects benefited sales by 3 percent. As a result of its focused strategy
to expand in the profitable, growing workplace and safety markets, global
sales of K-C Professional's (KCP) differentiated apparel, glove and wiper
products continued to experience strong growth. Meanwhile, sales of
washroom products posted solid gains in North America and Europe. In
addition, KCP continued to capitalize on opportunities in higher growth
international markets, generating double-digit sales increases in the
second quarter in both Asia and Latin America.
Sales of health care products were down 6.6 percent in the second
quarter. Sales volumes were approximately 8 percent lower, partially offset
by currency benefits of 1 percent. The decrease in sales volumes was
primarily attributable to the company's decision in the second half of last
year to exit the latex exam glove business, along with very strong sales of
face masks in the year-ago quarter primarily related to avian flu
preparedness. In the exam glove category, the company has successfully
transitioned many customers and users from latex to its higher-margin,
better performing nitrile products over the last nine months. The growth in
sales volumes of nitrile exam gloves, although rapid, has not fully
compensated for the drop-off in sales of latex gloves, due in part to
supply constraints that have recently been resolved as new manufacturing
capacity has come on line. As a result, overall sales volumes of exam
gloves declined approximately 30 percent in the second quarter. In other
areas of the business, second quarter sales volumes of medical devices,
particularly Ballard respiratory catheters, generated solid improvement.
The company believes health care sales comparisons will improve through
the second half of the year, given projected growth in demand for nitrile
exam gloves and the fact that sales of face masks peaked in the second and
third quarters of 2006.
Other second quarter operating results
Operating profit was $649 million in the second quarter of 2007,
compared with $544 million in 2006. Excluding charges for the company's
strategic cost reduction plan and related implementation costs, adjusted
operating profit for the quarter increased approximately 7 percent to $678
million from $634 million in the prior year. Top-line growth, along with
FORCE (Focused On Reducing Costs Everywhere) cost savings of $60 million
and strategic cost reductions of $16 million enabled the company to more
than offset approximately $85 million of cost inflation. The inflationary
increases were driven primarily by higher fiber costs, up about $55 million
versus the second quarter of 2006, and nearly $25 million for raw materials
other than fiber, including nonwovens and other oil-based materials.
The company's effective tax rate in the second quarter was 20.0 percent
in 2007 and 26.8 percent in 2006. Excluding the effects of charges for the
company's strategic cost reduction plan and related implementation costs,
as well as net benefits from synthetic fuel partnerships in both years, the
adjusted effective tax rate for the quarter was 28.9 percent in 2007
compared with 29.0 percent in 2006. The net benefit from synthetic fuel
partnership activities was consistent with previous guidance, increasing to
$12 million in the second quarter of 2007 from approximately $2 million in
the prior year.
Kimberly-Clark's share of net income of equity companies in the second
quarter was $43 million, essentially the same as in 2006 despite a slight
decline in net income at Kimberly-Clark de Mexico, S.A.B. de C.V. (KCM).
Continued improvement in results for KCM's consumer business and a lower
effective tax rate were offset by the absence of earnings from pulp and
paper operations that were sold late last year.
Competitive improvement initiatives -- update on strategic cost
reduction plan
The company's strategic cost reduction plan is part of a comprehensive,
multi-year effort announced in July 2005 to further improve
Kimberly-Clark's competitive position. The plan calls for streamlining
manufacturing and administrative operations primarily in North America and
Europe, with expected annual savings of at least $350 million by 2009.
These cost savings will allow for investment in targeted growth
opportunities and in key capabilities, including innovation, marketing and
customer development.
During the second quarter, the company continued to successfully
execute planned cost reduction activities, incurring pretax charges
totaling $29 million (approximately $17 million after tax) for the plan and
related incremental implementation costs. The most significant charges were
for consolidating infant and child care operations in North America and
streamlining of administrative operations in North America and Europe,
partially offset by reversal of previously accrued severance for employees
at a facility which the company has recently contracted to sell. With
year-to-date savings totaling $49 million, the company is on track to meet
its target to save $75 to $100 million for the full year.
To date, employees have been notified about workforce reductions and
other actions at 22 of the approximately 24 facilities slated for sale,
closure or streamlining as part of the cost reduction plan, and pretax
charges of $771 million (about $537 million after tax) have been recorded.
Based on the progress made to date, the company now expects that cumulative
pretax charges will be $875 to $925 million ($615 to $650 million after
tax) through the end of 2008, down from previously expected totals of $950
million to $1.0 billion ($665 to $700 million after tax). Additionally,
cash costs of the total charges are expected to be lower than previously
estimated -- approximately 35 percent versus less than 40 percent -- while
the level of anticipated annual pretax savings in 2009 remains unchanged.
Cash flow and balance sheet
Cash provided by operations in the second quarter increased to $652
million, up 9 percent from $600 million in 2006, primarily as a result of
higher earnings and a reduced investment in working capital compared with
the year-ago quarter. Capital spending for the quarter was $262 million in
2007 compared with $220 million in the prior year. The company remains on
track toward its targeted spending range of $900 million to $1 billion for
the full year. At June 30, 2007, total debt and preferred securities was
$4.4 billion, essentially the same level as the end of 2006.
During the second quarter, the company repurchased approximately 2.1
million shares of its common stock at a cost of $150 million, bringing
year-to-date repurchases to about 4.3 million shares at a cost of $300
million.
Accelerated share repurchase -- details
Under the terms of the ASR agreement, Kimberly-Clark will immediately
purchase approximately 29.6 million shares of its common stock from Bank of
America for an initial payment of $2.0 billion. Bank of America plans to
purchase an equivalent number of shares in the open market over a period of
up to approximately 11 months. Kimberly-Clark may receive or be required to
remit a price adjustment based upon the volume weighted average market
price of Kimberly-Clark common stock over the length of the ASR agreement.
All of the repurchased shares will be placed into treasury.
Kimberly-Clark will initially finance the ASR with short-term
borrowings, which the company, subject to market conditions, plans to
replace with longer-term debt financing at a later date.
Year-to-date results
For the first six months of 2007, sales of $8.9 billion were up 8
percent from $8.2 billion in the prior year, as a result of a 3-plus
percent increase in sales volumes, improvements of approximately 1 percent
in both net selling prices and product mix and favorable currency effects
of nearly 3 percent. Year-to-date operating profit of $1,265 million
included charges of more than $81 million for strategic cost reductions and
related incremental implementation costs. Adjusted operating profit
increased approximately 7 percent to $1,346 million in 2007 versus $1,263
million in 2006. The benefits of top-line growth, along with cost savings
of about $138 million, more than offset inflation in key cost components
totaling approximately $165 million and a $30 million increase in strategic
marketing spending. Through six months, diluted net income per share in
2007 was $1.99 compared with $1.41 in 2006. Adjusted earnings per share
increased 10 percent to $2.07 in 2007 from $1.88 in 2006. Those amounts are
adjusted for charges related to strategic cost reductions in both years and
incremental implementation costs in 2007.
Outlook
Commenting on the outlook, Falk said, "Based on our performance in the
first half and our plans for the balance of the year, we are raising our
earnings guidance for the full year of 2007. Specifically, we expect
adjusted earnings per share for the year will be in a range of $4.20 to
$4.25, including approximately 3 cents benefit from the increased level of
share repurchases in conjunction with the ASR. This compares with our
previous guidance for adjusted earnings per share of $4.10 to $4.20 and
will result in growth of 8 to 9 percent versus $3.90 per share in 2006.
Continued strong performance in Personal Care and developing and emerging
markets, along with improved revenue realization from price increases in
Consumer Tissue and K-C Professional and further benefits from our cost
savings programs, should enable us to overcome anticipated inflationary
pressures. We also remain committed to increasing spending for strategic
marketing in 2007 faster than sales in order to drive growth and further
improve brand equity. Moreover, we will maintain our financial discipline,
with a focus on deploying our cash wisely and improving returns for our
shareholders.
"As for the third quarter, we expect adjusted earnings per share will
be in a range of $1.04 to $1.06 per share, including a 1 cent per share
benefit from execution of the ASR."
Non-GAAP financial measures
This press release and the accompanying tables include the following
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:
-- adjusted earnings and earnings per share
-- adjusted operating profit
-- adjusted effective tax rate
These non-GAAP financial measures exclude certain items that are
included in the company's earnings, earnings per share, operating profit
and effective tax rate calculated in accordance with GAAP. A detailed
explanation of each of the adjustments to the comparable GAAP financial
measures is given below. In accordance with the requirements of Regulation
G, reconciliations of the non-GAAP financial measures to the comparable
GAAP financial measures are attached.
The company provides these non-GAAP financial measures as supplemental
information to our GAAP financial measures. Management and the company's
Board of Directors use adjusted earnings, adjusted earnings per share and
adjusted operating profit to (a) evaluate the company's historical and
prospective financial performance and its performance relative to its
competitors, (b) allocate resources and (c) measure the operational
performance of the company's business units and their managers.
Additionally, the Management Development and Compensation Committee of the
company's Board of Directors uses these non-GAAP financial measures when
setting and assessing achievement of incentive compensation goals. These
goals are based, in part, on the company's adjusted earnings per share and
improvement in the company's return on invested capital determined by
excluding the charges that are used in calculating these non-GAAP financial
measures.
In addition, Kimberly-Clark management believes that investors'
understanding of the company's performance is enhanced by including these
non-GAAP financial measures as a reasonable basis for comparing the
company's ongoing results of operations and for understanding the company's
effective tax rate. Many investors are interested in understanding the
performance of our businesses by comparing our results from ongoing
operations from one period to the next. By providing the non-GAAP financial
measures, together with the reconciliations, we believe we are enhancing
investors' understanding of our businesses and our results of operations,
as well as assisting investors in evaluating how well the company is
executing the material changes to our enterprise contemplated by the
strategic cost reduction plan. Also, many financial analysts who follow our
company focus on and publish both historical results and future projections
based on non-GAAP financial measures. We believe that it is in the best
interests of our investors for us to provide this information to analysts
so that those analysts accurately report the non-GAAP financial
information.
We calculate adjusted earnings, adjusted earnings per share, adjusted
operating profit and adjusted effective tax rate by excluding from the
comparable GAAP measure (i) charges related to our strategic cost reduction
plan for streamlining the company's operations, (ii) certain incremental
implementation costs relating to our strategic cost reduction plan, and
(iii) the net effect of the company's investment in synthetic fuel
partnerships on the company's effective tax rate. Each of these adjustments
and the basis for such adjustments are described below:
-- Strategic cost reduction plan. In July 2005, the company authorized a
strategic cost reduction plan aimed at streamlining manufacturing and
administrative operations, primarily in North America and Europe. The
strategic cost reduction plan commenced in the third quarter of 2005
and is expected to be substantially completed by December 31, 2008. At
the time we announced the plan, we advised investors that we would
report our earnings, earnings per share and operating profit excluding
the strategic cost reduction plan charges so that investors could
compare our operating results without the plan charges from period to
period and could assess our progress in implementing the plan.
Management does not consider these charges to be part of our earnings
from ongoing operations for purposes of evaluating the performance of
its business units and their managers and excludes these charges when
making decisions to allocate resources among its business units.
-- Implementation costs. In connection with our strategic cost reduction
plan, the company will incur incremental implementation costs related
to the transfer of certain administrative processes to third party
providers. These costs were incurred primarily in the first six months
of 2007. Management intends to exclude these implementation costs from
our earnings from ongoing operations for purposes of evaluating the
performance of our business units and their managers and to exclude
these costs when making decisions to allocate resources among its
business units.
-- Adjusted effective tax rate. In the analysis of its effective tax rate,
the company excludes the effects of charges for the strategic cost
reduction plan and related implementation costs, as well as net
benefits from the company's investment in synthetic fuel partnerships.
We believe that adjusting for these items provides improved insight
into the tax effects of our ongoing business operations.
These non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for the comparable GAAP measures. There are
limitations to these non-GAAP financial measures because they are not
prepared in accordance with GAAP and they may not be comparable to
similarly titled measures of other companies due to potential differences
in methods of calculation and items being excluded. The company compensates
for these limitations by using these non-GAAP financial measures as
supplements to the GAAP measures and by providing the reconciliations of
the non-GAAP and comparable GAAP financial measures. The non-GAAP financial
measures should be read only in conjunction with the company's consolidated
financial statements prepared in accordance with GAAP.
Conference call
A conference call to discuss this news release and other matters of
interest to investors and analysts will be held at 9 a.m. (CDT) today. The
conference call will be simultaneously broadcast over the World Wide Web.
Stockholders and others are invited to listen to the live broadcast or a
playback, which can be accessed by following the instructions set out in
the Investors section of the company's Web site
(http://www.kimberly-clark.com).
About Kimberly-Clark
Kimberly-Clark and its well-known global brands are an indispensable
part of life for people in more than 150 countries. Every day, 1.3 billion
people -- nearly a quarter of the world's population -- trust K-C brands
and the solutions they provide to enhance their health, hygiene and
well-being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex
and Depend, Kimberly-Clark holds No. 1 or No. 2 share positions in more
than 80 countries. To keep up with the latest K-C news and to learn more
about the company's 135-year history of innovation, visit
http://www.kimberly-clark.com.
Copies of Kimberly-Clark's Annual Report to Stockholders and its proxy
statements and other SEC filings, including Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, are made
available free of charge on the company's Web site on the same day they are
filed with the SEC. To view these filings, visit the Investors section of
the company's Web site.
Certain matters contained in this news release concerning the business
outlook, including new product introductions, cost savings and
acquisitions, anticipated costs and benefits related to the Competitive
Improvement Initiatives, anticipated benefits from the accelerated share
repurchase agreement, anticipated financial and operating results,
strategies, contingencies and anticipated transactions of the company
constitute forward-looking statements and are based upon management's
expectations and beliefs concerning future events impacting the company.
There can be no assurance that these future events will occur as
anticipated or that the company's results will be as estimated. For a
description of certain factors that could cause the company's future
results to differ materially from those expressed in any such
forward-looking statements, see Item 1A of the company's Annual Report on
Form 10-K for the year ended December 31, 2006 entitled "Risk Factors."
KIMBERLY-CLARK CORPORATION
CONSOLIDATED INCOME STATEMENT
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
Three Months
Ended June 30
2007 2006 Change
Net Sales $4,502.0 $4,161.4 +8.2%
Cost of products sold 3,056.0 2,873.8 +6.3%
Gross Profit 1,446.0 1,287.6 +12.3%
Marketing, research
and general expenses 797.6 741.9 +7.5%
Other (income) and expense, net (.3) 1.6 N.M.
Operating Profit 648.7 544.1 +19.2%
Nonoperating expense (47.5) (7.6) N.M.
Interest income 7.4 6.6 +12.1%
Interest expense (51.9) (55.1) -5.8%
Income Before Income Taxes
and Equity Interests 556.7 488.0 +14.1%
Provision for income taxes (111.5) (131.0) -14.9%
Income Before Equity Interests 445.2 357.0 +24.7%
Share of net income
of equity companies 42.8 42.9 -0.2%
Minority owners' share
of subsidiaries' net income (26.2) (22.3) +17.5%
Net Income $461.8 $377.6 +22.3%
Net Income Per
Share Basis - Diluted $1.00 $.82 +22.0%
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
Notes:
1. Charges for the Strategic Cost Reductions are included in the
Consolidated Income Statement as follows:
Three Months
Ended June 30
2007 2006
Cost of products sold $10.7 $66.4
Marketing, research and general expenses 7.1 23.0
Provision for income taxes (7.9) (29.3)
Strategic Cost Reductions after taxes 9.9 60.1
Minority interest (0.1) 0.2
Net Charges $9.8 $60.3
In addition, charges of $11.0 million ($7.1 million after tax) in 2007 for
the related implementation costs are included in marketing, research and
general expenses.
Unaudited
KIMBERLY-CLARK CORPORATION
CONSOLIDATED INCOME STATEMENT
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
Six Months
Ended June 30
2007 2006 Change
Net Sales $8,887.3 $8,229.3 +8.0%
Cost of products sold 6,089.0 5,788.6 +5.2%
Gross Profit 2,798.3 2,440.7 +14.7%
Marketing, research
and general expenses 1,530.2 1,454.4 +5.2%
Other (income) and expense,
net 3.3 21.8 -84.9%
Operating Profit 1,264.8 964.5 +31.1%
Nonoperating expense (75.1) (23.4) N.M.
Interest income 14.0 13.0 +7.7%
Interest expense (102.8) (109.4) -6.0%
Income Before Income Taxes
and Equity Interests 1,100.9 844.7 +30.3%
Provision for income taxes (223.6) (230.3) -2.9%
Income Before Equity Interests 877.3 614.4 +42.8%
Share of net income of
equity companies 87.8 81.9 +7.2%
Minority owners' share of
subsidiaries' net income (51.3) (43.6) +17.7%
Net Income $913.8 $652.7 +40.0%
Net Income Per Share
Basis - Diluted $1.99 $1.41 +41.1%
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
Notes:
1. Charges for the Strategic Cost Reductions are included in the
Consolidated Income Statement as follows:
Six Months
Ended June 30
2007 2006
Cost of products sold $52.5 $222.1
Marketing, research and general expenses 15.2 65.0
Other (income) and expense, net (9.3) 10.9
Provision for income taxes (33.5) (82.7)
Strategic Cost Reductions after taxes 24.9 215.3
Minority interest (.1) (1.4)
Net Charges $24.8 $213.9
In addition, charges of $23.2 million ($14.8 million after tax) in 2007
for the related implementation costs are included in marketing, research and
general expenses.
2. Other Information:
Six Months
Ended June 30
2007 2006
Cash Dividends Declared
Per Share $1.06 $.98
June 30
Common Shares (Millions) 2007 2006
Outstanding, as of 455.3 458.3
Average Diluted for:
Three Months Ended 459.6 460.8
Six Months Ended 459.8 461.4
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars)
Supplemental Financial Information:
Preliminary Balance Sheet Data:
June 30 December 31
2007 2006
Cash and cash equivalents $457.0 $360.8
Accounts receivable 2,401.6 2,336.7
Inventories 2,243.5 2,004.5
Total assets 17,846.6 17,067.0
Accounts payable 1,711.0 1,530.8
Debt payable within one year 1,335.1 1,326.4
Total current liabilities 4,919.3 5,015.8
Long-term debt 2,278.4 2,276.0
Preferred securities of subsidiary 811.9 793.4
Stockholders' equity 6,695.1 6,097.4
Six Months
Ended June 30
Preliminary Cash Flow Data: 2007 2006
Cash provided by operations $1,176.0 $1,118.7
Cash used for investing $(498.4) $(365.3)
Cash used for financing $(584.6) $(783.6)
Depreciation and amortization $412.9 $499.6
Capital spending $544.0 $398.6
Cash dividends paid $465.8 $434.5
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
Description of Business Segments
The Corporation is organized into operating segments based on product
groupings. These operating segments have been aggregated into four
reportable global business segments: Personal Care; Consumer Tissue; K-C
Professional & Other; and Health Care. The reportable segments were
determined in accordance with how the Corporation's executive managers
develop and execute the Corporation's global strategies to drive growth and
profitability of the Corporation's worldwide Personal Care, Consumer
Tissue, K-C Professional & Other, and Health Care operations. These
strategies include global plans for branding and product positioning,
technology, research and development programs, cost reductions including
supply chain management, and capacity and capital investments for each of
these businesses. Segment management is evaluated on several factors,
including operating profit. Segment operating profit excludes other income
and (expense), net; income and expense not associated with the business
segments; and the costs of corporate decisions related to the Strategic
Cost Reductions. Corporate & Other includes the costs related to the
Strategic Cost Reductions.
The principal sources of revenue in each of our global business
segments are described below.
The Personal Care segment manufactures and markets disposable diapers,
training and youth pants and swimpants; baby wipes; feminine and
incontinence care products; and related products. Products in this segment
are primarily for household use and are sold under a variety of brand
names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex,
Lightdays, Depend, Poise and other brand names.
The Consumer Tissue segment manufactures and markets facial and
bathroom tissue, paper towels, napkins and related products for household
use. Products in this segment are sold under the Kleenex, Scott,
Cottonelle, Viva, Andrex, Scottex, Hakle, Page and other brand names.
The K-C Professional & Other segment manufactures and markets facial
and bathroom tissue, paper towels, napkins, wipers and a range of safety
products for the away-from-home marketplace. Products in this segment are
sold under the Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, Kleenguard
and Kimcare brand names.
The Health Care segment manufactures and markets disposable health care
products such as surgical gowns, drapes, infection control products,
sterilization wrap, face masks and exam gloves, respiratory products and
other disposable medical products. Products in this segment are sold under
the Kimberly-Clark, Ballard and other brand names.
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
SELECTED BUSINESS SEGMENT DATA
(Millions of dollars)
Three Months Six Months
Ended June 30 Ended June 30
2007 2006 Change 2007 2006 Change
NET SALES:
Personal Care $1,881.5 $1,715.1 +9.7% $3,679.1 $3,340.1 +10.1%
Consumer Tissue 1,568.6 1,434.4 +9.4% 3,161.7 2,931.6 +7.8%
K-C Professional
& Other 763.0 704.0 +8.4% 1,460.4 1,356.8 +7.6%
Health Care 296.7 317.8 -6.6% 599.4 618.3 -3.1%
Corporate &
Other 9.0 7.7 +16.9% 17.0 16.7 +1.8%
Intersegment
Sales (16.8) (17.6) -4.5% (30.3) (34.2) -11.4%
Consolidated $4,502.0 $4,161.4 +8.2% $8,887.3 $8,229.3 +8.0%
OPERATING PROFIT:
Personal Care $393.2 $328.4 +19.7% $740.4 $628.6 +17.8%
Consumer Tissue 168.9 177.6 -4.9% 376.0 386.6 -2.7%
K-C Professional
& Other 119.9 113.9 +5.3% 228.6 218.4 +4.7%
Health Care 52.0 58.3 -10.8% 107.6 109.6 -1.8%
Corporate & Other (85.6) (132.5) -35.4% (184.5) (356.9) -48.3%
Other income and
(expense), net .3 (1.6) N.M. (3.3) (21.8) -84.9%
Consolidated $648.7 $544.1 +19.2% $1,264.8 $964.5 +31.1%
Note: Corporate & Other and Other income and (expense), net, include the
following amounts of pre-tax charges for the Strategic Cost
Reductions. In 2007, Corporate & Other also includes the related
implementation costs.
Three Months Six Months
Ended June 30 Ended June 30
2007 2006 2007 2006
Corporate & Other $(28.8) $(89.4) $(90.9) $(287.1)
Other income and
(expense), net -- -- 9.3 (10.9)
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
SELECTED BUSINESS SEGMENT DATA
PERCENTAGE CHANGE IN NET SALES VERSUS PRIOR YEAR
Three Months Ended June 30, 2007
Net Mix/
Total Volume Price Other(1) Currency
Consolidated 8.2 4 1 -- 3
Personal Care 9.7 6 -- 1 3
Consumer Tissue 9.4 3 2 -- 4
K-C Professional
& Other 8.4 4 1 -- 3
Health Care (6.6) (8) -- -- 1
Six Months Ended June 30, 2007
Net Mix/
Total Volume Price Other(1) Currency
Consolidated 8.0 3 1 1 3
Personal Care 10.1 7 -- -- 3
Consumer Tissue 7.8 1 3 1 3
K-C Professional
& Other 7.6 4 1 -- 3
Health Care (3.1) (5) -- 1 1
(1) Mix/Other includes rounding.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
NON-GAAP RECONCILIATION SCHEDULES
The tables on the following pages present the reconciliation of non-GAAP
financial measures to GAAP financial measures.
EARNINGS SUMMARY:
Three Months Ended June 30
2007 2006
Diluted Diluted
Income Earnings Income Earnings
(Expense) Per Share (Expense) Per Share
Adjusted Earnings $478.7 $1.04 $437.9 $.95
Adjustments for:
Strategic Cost
Reduction charges (9.8) (.02) (60.3) (.13)
Implementation costs (7.1) (.02) -- --
Net Income $461.8 $1.00 $377.6 $.82
Six Months Ended June 30
2007 2006
Diluted Diluted
Income Earnings Income Earnings
(Expense) Per Share (Expense) Per Share
Adjusted Earnings $953.4 $2.07 $866.6 $1.88
Adjustments for:
Strategic Cost
Reduction charges (24.8) (.05) (213.9) (.46)
Implementation costs (14.8) (.03) -- --
Rounding -- -- -- (.01)
Net Income $913.8 $1.99 $652.7 $1.41
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars, except per share amounts)
OPERATING PROFIT SUMMARY:
Three Months
Ended June 30
2007 2006
Adjusted Operating Profit $677.5 $633.5
Adjustments for:
Strategic Cost Reduction charges (17.8) (89.4)
Implementation costs (11.0) --
Operating Profit $648.7 $544.1
Six Months
Ended June 30
2007 2006
Adjusted Operating Profit $1,346.4 $1,262.5
Adjustments for:
Strategic Cost Reduction charges (58.4) (298.0)
Implementation costs (23.2) --
Operating Profit $1,264.8 $964.5
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars)
Effective Income Tax Rate Reconciliation - Adjustments(1) and Synthetic
Fuel Partnership Activities:
Three Months Ended June 30, 2007
Excluding Synthetic Fuel
As Adjust- Adjust- Effect of Excluding
Reported ments(1) ments(1) Activities Activities
Income Before
Income Taxes $556.7 $(28.8) $585.5 $(47.5) $633.0
Provision for
Income Taxes 111.5 (11.8) 123.3 (59.5) 182.8
Net Synthetic
Fuel Benefit $12.0
Effective Income
Tax Rate 20.0%
Adjusted Effective
Income Tax Rate 21.1% 28.9%
Three Months Ended June 30, 2006
Excluding Synthetic Fuel
As Adjust- Adjust- Effect of Excluding
Reported ments(1) ments(1) Activities Activities
Income Before
Income Taxes $488.0 $(89.4) $577.4 $(7.6) $585.0
Provision for
Income Taxes 131.0 (29.3) 160.3 (9.2) 169.5
Net Synthetic
Fuel Benefit $1.6
Effective Income
Tax Rate 26.8%
Adjusted Effective
Income Tax Rate 27.8% 29.0%
(1) Charges for Strategic Cost Reductions and related implementation
costs in 2007 and Strategic Cost Reductions in 2006.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
(Millions of dollars)
Effective Income Tax Rate Reconciliation - Adjustments(1) and Synthetic
Fuel Partnership Activities:
Six Months Ended June 30, 2007
Excluding Synthetic Fuel
As Adjust- Adjust- Effect of Excluding
Reported ments(1) ments(1) Activities Activities
Income Before
Income Taxes $1,100.9 $(81.6) $1,182.5 $(75.1) $1,257.6
Provision for
Income Taxes 223.6 (41.9) 265.5 (94.2) 359.7
Net Synthetic
Fuel Benefit $19.1
Effective Income
Tax Rate 20.3%
Adjusted Effective
Income Tax Rate 22.5% 28.6%
Six Months Ended June 30, 2006
Excluding Synthetic Fuel
As Adjust- Adjust- Effect of Excluding
Reported ments(1) ments(1) Activities Activities
Income Before
Income Taxes $844.7 $(298.0) $1,142.7 $(23.4) $1,166.1
Provision for
Income Taxes 230.3 (82.7) 313.0 (28.7) 341.7
Net Synthetic
Fuel Benefit $5.3
Effective Income
Tax Rate 27.3%
Adjusted Effective
Income Tax Rate 27.4% 29.3%
(1) Charges for Strategic Cost Reductions and related implementation
costs in 2007 and Strategic Cost Reductions in 2006.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED JUNE 30
OUTLOOK FOR 2007
Estimated Full-Year 2007 Diluted Earnings Per Share:
Adjusted Earnings Per Share $4.20 - $4.25
Strategic Cost Reductions (.13) - (.12)
Implementation costs (.04) - (.04)
Earnings Per Share - Diluted $4.03 - $4.09
Estimated Third Quarter 2007 Diluted Earnings Per Share:
Adjusted Earnings Per Share $1.04 - $1.06
Strategic Cost Reductions (.05) - (.05)
Implementation costs (.01) - (.01)
Earnings Per Share - Diluted $.98 - $1.00
SOURCE Kimberly-Clark Corporation
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Related links:
http://www.kimberly-clark.com
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/19991117/KMBLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
investor relations, Mike Masseth,
+1-972-281-1478, mmasseth@kcc.com, or Paul Alexander,
+1-972-281-1440, palexand@kcc.com, or media relations, Dave
Dickson, +1-972-281-1481, ddickson@kcc.com, all of Kimberly-Clark
Corporation
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