Net Sales Rose More Than 8 Percent to $5.0 Billion, With Increases in Each
Business Segment
GAAP-Basis EPS Were $0.99 vs. $1.04 in 2007; Adjusted EPS Decreased 5
Percent to $1.02, in Line With Previous Guidance for the Quarter
Cash Provided By Operations Increased 13 Percent on Improved Working
Capital Performance
Company Updates 2008 Earnings Guidance to Reflect Near-Term Impact of
Recent Declines in Key Foreign Currency Exchange Rates
DALLAS, Oct. 22 /PRNewswire-FirstCall/ -- Kimberly-Clark Corporation
(NYSE: KMB) today reported that net sales in the third quarter of 2008
advanced 8.2 percent to $5.0 billion. Sales were higher in all four of the
company's business segments, highlighted by continued strong performance in
Personal Care and K-C Professional & Other and double-digit sales growth in
developing and emerging markets. Organic sales growth totaled almost 6
percent, driven by improvements in net selling prices and product mix of
about 4 percent and 2 percent, respectively, while sales volumes declined
less than 1 percent. Changes in currency exchange rates benefited sales by
less than 3 percent.
Diluted net income per share in the third quarter of 2008 was $0.99
compared with $1.04 in the prior year. Adjusted earnings for the quarter
were $1.02 per share versus $1.07 per share in 2007 and in line with the
company's previous guidance range of $.98 to $1.03 per share. The top-line
growth, along with cost savings, higher net income from equity affiliates
and a lower share count, contributed positively to the current quarter's
results; however, earnings were negatively impacted by inflation in
commodity costs totaling approximately $250 million. Meanwhile, the company
continued to step up its investment in strategic marketing, increasing
spending by $25 million compared with the third quarter of last year.
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 and the
gain on a litigation settlement in 2007. Further information about these
adjustments, along with the company's rationale for reporting adjusted
earnings and other non-GAAP financial measures is provided later in this
news release.
Chairman and Chief Executive Officer Thomas J. Falk said, "Our third
quarter results show that our focus on improving revenue realization is
beginning to pay off, with higher prices and better product mix. While this
strategy has dampened volume growth more than we anticipated in the
near-term, I am confident we are doing the right things to strengthen our
competitive position and improve our profitability over the long haul. I am
also proud of the accomplishments of K-C teams around the world who are
striving to overcome the most challenging cost hurdle the company has ever
faced. Finally, I am pleased by the continued strength of our cash flow and
our balance sheet, particularly in light of recent developments impacting
global financial markets."
Review of third quarter sales by business segment
Sales of personal care products were 11.7 percent greater than in the
third quarter of 2007. Sales volumes and net selling prices both increased
about 4 percent, product mix improved more than 1 percent and currency
effects added approximately 3 percent to sales.
Personal care sales in North America improved about 7 percent versus
the year-ago quarter, reflecting higher net selling prices of 4 percent,
along with sales volume growth and favorable product mix of more than 1
percent each. Price increases were implemented for Depend and Poise
incontinence and Kotex feminine care products in the second quarter and for
Huggies diapers and Pull-Ups training pants in both the first and third
quarters. Sales volumes for Huggies diapers were up slightly, while volumes
for the company's child care, feminine care and incontinence care brands
were down low single-digits. Meanwhile, sales volumes rose at a
double-digit rate for Huggies baby wipes.
In Europe, personal care sales rose approximately 2 percent in the
quarter. Favorable currency effects increased sales by 9 percent, while net
selling prices overall were unchanged. Sales volumes decreased nearly 8
percent, driven primarily by lower sales of Huggies diapers in the
company's four core markets of the U.K., France, Italy and Spain, where
promotional activity remained intense.
In developing and emerging markets, personal care sales climbed almost
20 percent, as the company continued to benefit from strong product and
customer programs in rapidly growing markets. Sales volumes increased by
more than 9 percent, while net selling prices improved about 4 percent and
product mix was better by more than 2 percent. Stronger foreign currencies
positively impacted sales comparisons by more than 4 percent. The growth in
sales volumes was broad-based, with particular strength throughout Latin
America and in South Korea, Russia, Turkey and Vietnam.
Sales of consumer tissue products advanced 5.0 percent in the third
quarter. Although overall sales volumes decreased 7 percent versus the
prior year, net selling prices and product mix improved by 7 percent and 2
percent, respectively, and favorable currency exchange rates benefited
sales by 3 percent.
In North America, sales of consumer tissue products decreased 2 percent
in the third quarter, as an increase in net selling prices of about 6
percent and improved product mix of 1 percent were more than offset by a 9
percent decline in sales volumes. The improvement in net selling prices was
primarily attributable to price increases for bathroom tissue and paper
towels implemented during the first and third quarters in the U.S. List
prices for facial tissue were raised late in the third quarter. Sales
volumes were down mid-single digits in bathroom tissue and facial tissue
and double-digits in paper towels, primarily as a result of the company's
focus on improving revenue realization. A portion of the overall volume
decline is also due to the company's decision in late 2007 to shed certain
low-margin private label business. Although branded bathroom tissue volumes
declined, revenue growth was solid, with particular strength in the
mainline Scott 1000 and super premium Cottonelle Ultra brands. Meanwhile,
sales of Viva and Scott paper towels have been impacted by high levels of
competitive spending and a shift in the category toward lower-priced,
private label products.
In Europe, consumer tissue sales increased about 7 percent compared
with the third quarter of 2007. Currency exchange rates strengthened by an
average of more than 6 percent, accounting for virtually all of the
increase. Sales volumes were down approximately 4 percent, due mainly to
lower sales of Andrex and Scottex bathroom tissue and Kleenex facial tissue
in response to higher prices and a slowdown in category sales, particularly
in the U.K. Net selling prices improved 4 percent, reflecting list price
increases across multiple markets, partially offset by competitive
promotional activity, while product mix also was better by 1 percent.
Consumer tissue sales in developing and emerging markets rose
approximately 18 percent. Net selling prices and product mix increased 12
percent and 4 percent, respectively, as the company has raised prices in
response to higher raw materials costs and improved mix with more
differentiated, value-added products. Currency gains also benefited sales
by nearly 5 percent. Although sales volumes grew in a number of key
markets, including Australia, Russia, Israel and Brazil, volumes declined
about 3 percent overall, mainly as a result of the company's strategies to
drive price and mix.
Sales of K-C Professional (KCP) & other products went up 8.0 percent
from the year-ago quarter. Net selling prices and product mix improved by 4
percent and 2 percent, respectively, while sales volumes were approximately
1 percent below prior year levels. Changes in foreign currency rates
increased sales by about 3 percent. Globally, KCP continued to generate
double-digit growth in sales of higher-margin workplace and safety
products. In North America, improvements of 3 percent in both price and mix
were partially offset by a 4 percent reduction in sales volumes. Sales
volumes softened somewhat as a result of slowing economic growth in
combination with the company's strategies to raise prices and enhance the
mix of products sold and in comparison to strong growth in the year-ago
quarter. In Europe, KCP achieved 20-plus percent sales growth, as
innovative product offerings contributed to a 10 percent rise in sales
volumes, net selling prices were about 2 percent higher and favorable
currency effects added 9 percent to sales. Across developing and emerging
markets, sales were up 16 percent on sales volume gains of 2 percent, net
selling price/mix improvements of 10 percent and currency benefits of 4
percent.
Sales of health care products increased 3.7 percent in the third
quarter, with 5 percent growth in sales volumes and a 1 percent lift from
currency exchange rates, partially offset by a 2 percent decline in net
selling prices. The improvement in sales volumes was paced by double-digit
growth in exam gloves, while overall sales volumes for both surgical
supplies and medical devices were up at a mid-single digit rate. The price
decline was mainly attributable to competitive conditions affecting
surgical supplies in North America and Europe.
Other third quarter operating results
Operating profit was $610 million in the third quarter of 2008,
compared with $683 million in 2007. Excluding net charges for the company's
strategic cost reduction plan in both years and related implementation
costs and the gain on a litigation settlement in 2007, adjusted operating
profit for the quarter decreased 9 percent to $626 million from $691
million in the prior year. The decrease was driven by significant inflation
in key manufacturing cost inputs which, combined with the increase in
strategic marketing spending, exceeded the benefits from top-line growth
and cost savings. Cost inflation for the quarter totaled $250 million, an
all-time high, consisting of approximately $110 million for raw materials
other than fiber, primarily polymer resins and other oil-based materials,
more than $60 million in fiber costs, nearly $50 million of energy costs
and about $30 million in distribution costs. Cost savings in the quarter
from the company's FORCE (Focused On Reducing Costs Everywhere) program and
strategic cost reduction plan totaled $19 million and $28 million,
respectively.
The company's effective tax rate in the third quarter was 28.1 percent
in 2008 and 27.6 percent in 2007. Excluding the effects of charges for the
company's strategic cost reduction plan in both years, as well as related
implementation costs, the gain on a litigation settlement and net effects
from synthetic fuel partnerships in 2007, the adjusted effective tax rate
for the quarter was 28.2 percent in 2008, up slightly compared with 27.6 in
2007, as expected. Synthetic fuel partnership activities provided a net
benefit of $1 million in the third quarter of 2007. Synthetic fuel produced
by the partnerships was eligible for tax credits through the end of 2007,
at which time the law giving rise to the tax benefits expired. The
partnerships will be dissolved during 2008 at no cost to the company.
Reconciliations of the above effective tax rate calculations are provided
in a separate section of this news release.
Kimberly-Clark's share of net income of equity companies in the third
quarter increased to about $53 million from approximately $39 million in
2007, primarily as a result of higher net income at Kimberly-Clark de
Mexico, S.A.B. de C.V. (KCM). Results at KCM were boosted by double-digit
growth in sales and a favorable income tax settlement, partially offset by
cost inflation and currency losses incurred on approximately $300 million
of U.S. dollar-denominated debt. The benefit to Kimberly-Clark in the
current quarter from KCM's tax settlement was equivalent to 3 cents per
share, while the negative impact of the currency losses amounted to 1 cent
per share.
Minority owners' share of subsidiaries' net income was approximately
$34 million in the third quarter of 2008 compared with about $25 million in
the prior year. The increase was due mainly to minority owners' share of
increased earnings at majority-owned subsidiaries in Latin America and the
Middle East and higher returns payable on the redeemable preferred
securities issued by the company's consolidated financing subsidiary.
Update on cost savings programs
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.
During the third quarter, the most significant activities involved
consolidating infant and child care operations in North America, improving
the cost structure in Health Care and streamlining administrative
operations in North America and Europe.
The plan will be completed by the end of this year. Employees at all 23
facilities slated for sale, closure or streamlining as part of the cost
reduction plan have been notified about workforce reductions and other
actions. To date, pretax charges of $875 million (about $610 million after
tax) have been incurred compared with expected cumulative charges for
implementing the plan of $880 to $900 million ($610 to $620 million after
tax).
Through the first nine months of 2008, pretax savings of $94 million
have been realized, bringing the cumulative total to approximately $320
million since the plan's inception.
Regarding the company's ongoing FORCE program, year-to-date savings of
$43 million are below anticipated levels, primarily as a result of
higher-than-expected manufacturing costs in the second and third quarters.
With combined strategic cost reduction and FORCE savings of $137
million for the year-to-date, it is possible the full year total may not
reach the company's target for savings of $200 to $250 million in 2008 from
the two programs.
Cash flow and balance sheet
Cash provided by operations in the third quarter increased 13 percent
to $641 million from $568 million in 2007, as improved working capital
performance compared with the year-ago quarter more than offset a decrease
in cash earnings. Capital spending for the quarter was $219 million in 2008
compared with $233 million in the prior year. Through nine months, capital
spending of $652 million is in line with the company's plan to spend $850
to $950 million this year. During the third quarter, the company
repurchased approximately 2.2 million shares of its common stock at a cost
of $130 million, bringing year-to-date repurchases to about 8.7 million
shares at a cost of $550 million. To be prudent in the current environment,
the company has reduced its full year target for share repurchases to $600
to $650 million from its previous range of $700 to $800 million.
At September 30, 2008, total debt and redeemable preferred securities
was $7.3 billion compared with $7.4 billion at June 30, 2008 and $6.5
billion at the end of 2007.
Year-to-date results
For the first nine months of 2008, sales of $14.8 billion rose 9.7
percent from $13.5 billion in the prior year. Sales volumes increased about
2 percent, net selling prices were higher by more than 3 percent and
product mix was favorable by 1 percent, resulting in organic sales growth
of 6 percent, while favorable currency effects added approximately 4
percent to sales. Year-to-date operating profit of $1,924 million included
charges of about $54 million for strategic cost reductions. Adjusted
operating profit was $1,978 million, down approximately 3 percent from
$2,038 million in 2007. The benefits of top-line growth, along with cost
savings of $137 million, were more than offset by inflation in key cost
components totaling approximately $590 million, an increase in strategic
marketing spending of more than $70 million and higher levels of selling
and administrative expenses, mainly to support growth in developing and
emerging markets. Through nine months, diluted net income per share in 2008
was $3.03, the same as in 2007. Adjusted earnings per share decreased
slightly to $3.13 in 2008 from $3.14 in 2007. Those amounts are adjusted
for charges related to strategic cost reductions in both years, related
incremental implementation costs and the gain on a litigation settlement in
2007, as well as an extraordinary loss recorded in the second quarter of
2008.
Outlook
Commenting on the outlook, Falk said, "The unprecedented volatility in
global commodity, currency and financial markets has resulted in a high
level of uncertainty in the current business environment. Although this
makes it more challenging to predict our results in the near-term, we will
continue to do the right things for the long-term health of our business
and effectively manage those things we can control. In short, we will
continue to focus on executing our Global Business Plan strategies.
"Based on plans in place, we are targeting continued solid organic
sales growth over the balance of the year, driven primarily by higher net
selling prices and improved product mix. Sales volume growth will likely be
relatively weak due to our focus on revenue realization and areas of
economic weakness. Nonetheless, we still expect to maintain higher levels
of investment in strategic marketing and customer development. Given the
significant changes in foreign currency exchange rates over the last month,
we now anticipate currency will be a drag on fourth quarter sales
comparisons instead of a benefit.
"Meanwhile, the price increases implemented during the third quarter,
along with some benefit from recent commodity cost reductions, should help
drive a sequential improvement in adjusted operating profit in the fourth
quarter versus the third quarter, assuming consumer demand holds up and no
further material changes in input costs and key foreign currencies. I am
encouraged that commodity costs have recently started to decline. However,
it could take up to six months before the lower costs are fully realized in
our results, while offsetting currency effects are reflected almost
immediately. In fact, we estimate that the effects of recent changes in
currency exchange rates, including currency translation and transaction
losses at K-C de Mexico, will have an adverse impact on our fourth quarter
results by more than 10 cents per share versus our previous plan.
"All in all, based on what we know today, we expect adjusted earnings
per share in the fourth quarter will be in a range of $1.02 to $1.07,
compared with $1.11 in 2007. Given the anticipated fourth quarter
performance, we expect adjusted earnings per share for the full year of
2008 will be in a range of $4.15 to $4.20 versus $4.25 in 2007. This
compares with our previous guidance for adjusted earnings per share of
$4.20 to $4.30."
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 SEC
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 operating
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 adjusted return on invested capital determined
by excluding the charges or gains 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, (iii)
the gain on a litigation settlement, (iv) an after-tax extraordinary loss
related to the restructuring of certain contractual arrangements, and (v)
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 has incurred 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 excludes these implementation costs from our
earnings from ongoing operations for purposes of evaluating the
performance of our business units and their managers and excludes these
costs when making decisions to allocate resources among its business
units.
-- Litigation settlement. In the third quarter of 2007, the company
received proceeds from settlement of litigation related to prior years'
operations in Latin America. Management does not consider this gain to
be part of our earnings from ongoing operations for purposes of
evaluating the performance of its business units and their managers and
excludes the gain when making decisions to allocate resources among its
business units.
-- Extraordinary loss. In June 2008, the company restructured contractual
arrangements of two financing entities, which resulted in the
consolidation of these two entities. As a result of the consolidation,
notes receivable and loan obligations held by these entities with
aggregate fair values of $600 million and $612 million, respectively,
were included in long-term notes receivable and long-term debt on the
company's consolidated balance sheet. Because the fair value of the
loans exceeded the fair value of the notes receivable, the company
recorded an after-tax extraordinary loss of approximately $8 million on
its income statement for the period ended June 30, 2008, as required by
FIN 46R. Management does not consider this loss to be part of our
earnings from ongoing operations for purposes of evaluating the
performance of its business units and their managers and excludes this
loss 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, related implementation costs and the litigation
settlement, as well as net effects 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 136-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, changes in
finished product selling prices, anticipated costs and benefits related to
the strategic cost reduction plan, 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, 2007 entitled "Risk Factors."
KIMBERLY-CLARK CORPORATION
CONSOLIDATED INCOME STATEMENT
PERIODS ENDED SEPTEMBER 30
(Millions of dollars, except per share amounts)
Three Months
Ended September 30
2008 2007 Change
Net Sales $4,998.2 $4,620.6 + 8.2%
Cost of products sold 3,535.0 3,177.1 + 11.3%
Gross Profit 1,463.2 1,443.5 + 1.4%
Marketing, research and general expenses 849.0 783.7 + 8.3%
Other (income) and expense, net 4.7 (22.9) N.M.
Operating Profit 609.5 682.7 - 10.7%
Nonoperating expense - (6.5) N.M.
Interest income 14.9 9.3 + 60.2%
Interest expense (75.5) (78.6) - 3.9%
Income Before Income Taxes and Equity
Interests 548.9 606.9 - 9.6%
Provision for income taxes (154.5) (167.5) - 7.8%
Income Before Equity Interests 394.4 439.4 - 10.2%
Share of net income of equity companies 52.7 39.1 + 34.8%
Minority owners' share of subsidiaries'
net income (34.0) (25.4) + 33.9%
Net Income $413.1 $453.1 - 8.8%
Net Income Per Share Basis - Diluted $.99 $1.04 - 4.8%
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
Notes:
1. Charges for the Strategic Cost Reductions are included in the
Consolidated Income Statement as follows:
Three Months
Ended September 30
2008 2007
Cost of products sold $11.0 $18.9
Marketing, research and general expenses 5.0 7.8
Other (income) and expense, net .1 (3.9)
Provision for income taxes (4.7) (2.5)
Strategic cost reductions after taxes 11.4 20.3
Minority interest (.1) -
Net Charges $11.3 $20.3
In addition, charges of $2.0 million ($1.3 million after tax) in 2007
for the related implementation costs are included in marketing, research
and general expenses.
2. Other (income) and expense, net for 2007 includes a pre-tax gain of
$16.4 million ($9.9 million after tax) for a litigation settlement.
Unaudited
KIMBERLY-CLARK CORPORATION
CONSOLIDATED INCOME STATEMENT
PERIODS ENDED SEPTEMBER 30
(Millions of dollars, except per share amounts)
Nine Months
Ended September 30
2008 2007 Change
Net Sales $14,817.1 $13,507.9 + 9.7%
Cost of products sold 10,413.7 9,266.1 + 12.4%
Gross Profit 4,403.4 4,241.8 + 3.8%
Marketing, research and general expenses 2,474.7 2,313.9 + 6.9%
Other (income) and expense, net 5.0 (19.6) N.M.
Operating Profit 1,923.7 1,947.5 - 1.2%
Nonoperating expense - (81.6) N.M.
Interest income 30.6 23.3 + 31.3%
Interest expense (223.0) (181.4) + 22.9%
Income Before Income Taxes, Equity Interests
and Extraordinary Loss 1,731.3 1,707.8 + 1.4%
Provision for income taxes (493.7) (391.1) + 26.2%
Income Before Equity Interests and
Extraordinary Loss 1,237.6 1,316.7 - 6.0%
Share of net income of equity companies 144.5 126.9 + 13.9%
Minority owners' share of subsidiaries'
net income (103.7) (76.7) + 35.2%
Extraordinary loss, net of income taxes (7.7) - N.M.
Net Income $1,270.7 $1,366.9 - 7.0%
Net Income Per Share Basis - Diluted
Before extraordinary loss $3.05 $3.03 + 0.7%
Net Income $3.03 $3.03 -
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 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:
Nine Months
Ended September 30
2008 2007
Cost of products sold $31.5 $71.4
Marketing, research and general expenses 21.2 23.0
Other (income) and expense, net 1.7 (13.2)
Provision for income taxes (17.9) (36.0)
Strategic cost reductions after taxes 36.5 45.2
Minority interest (.1) (.1)
Net Charges $36.4 $45.1
In addition, charges of $25.2 million ($16.1 million after tax) in 2007
for the related implementation costs are included in marketing, research
and general expenses.
2. Other (income) and expense, net for 2007 includes a pre-tax gain of
$16.4 million ($9.9 million after tax) for a litigation settlement.
3. Other Information:
Nine Months
Ended September 30
2008 2007
Cash Dividends Declared Per Share $1.74 $1.59
September 30
Common Shares (Millions) 2008 2007
Outstanding, as of 414.7 423.7
Average Diluted for:
Three Months Ended 416.8 436.0
Nine Months Ended 419.7 451.7
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
Supplemental Financial Information:
Preliminary Balance Sheet Data:
September 30 December 31
2008 2007
Cash and cash equivalents $524.1 $472.7
Accounts receivable, net 2,478.1 2,560.6
Inventories 2,569.8 2,443.8
Total current assets 6,042.8 6,096.6
Total assets 18,701.2 18,439.7
Accounts payable 1,742.6 1,768.3
Debt payable within one year 1,870.9 1,097.9
Total current liabilities 5,655.5 4,928.6
Long-term debt 4,369.5 4,393.9
Redeemable preferred securities of subsidiary 1,011.0 1,004.6
Stockholders' equity 4,995.0 5,223.7
Nine Months
Ended September 30
Preliminary Cash Flow Data: 2008 2007
Cash provided by operations $1,837.8 $1,743.6
Cash used for investing $(635.5) $(716.4)
Cash used for financing $(1,122.4) $(854.7)
Depreciation and amortization $595.5 $626.4
Capital spending $652.4 $776.8
Cash dividends paid $709.4 $707.7
Unaudited
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 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, 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
SELECTED BUSINESS SEGMENT DATA
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
Three Months Nine Months
Ended September 30 Ended September 30
2008 2007 Change 2008 2007 Change
NET SALES:
Personal Care $2,146.4 $1,920.8 +11.7% $6,357.5 $5,599.9 +13.5%
Consumer Tissue 1,711.4 1,629.8 + 5.0% 5,108.0 4,791.5 + 6.6%
K-C Professional
& Other 842.8 780.5 + 8.0% 2,443.6 2,240.9 + 9.0%
Health Care 302.8 292.1 + 3.7% 907.0 891.5 + 1.7%
Corporate & Other 16.7 10.5 N.M. 61.5 27.5 N.M.
Intersegment Sales (21.9) (13.1) N.M. (60.5) (43.4) N.M.
Consolidated $4,998.2 $4,620.6 + 8.2% $14,817.1 $13,507.9 + 9.7%
OPERATING PROFIT:
Personal Care $404.4 $396.3 + 2.0% $1,269.0 $1,136.7 +11.6%
Consumer Tissue 132.9 166.1 -20.0% 418.8 542.1 -22.7%
K-C Professional
& Other 119.5 125.1 - 4.5% 327.1 353.7 - 7.5%
Health Care 21.9 43.4 -49.5% 97.9 151.0 -35.2%
Corporate & Other (64.5) (71.1) - 9.3% (184.1) (255.6) -28.0%
Other income and
(expense), net (4.7) 22.9 N.M. (5.0) 19.6 N.M.
Consolidated $609.5 $682.7 -10.7% $1,923.7 $1,947.5 -1.2%
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 Nine Months
Ended September 30 Ended September 30
2008 2007 2008 2007
Corporate & Other $(16.0) $(28.7) $(52.7) $(119.6)
Other income and (expense), net (.1) 3.9 (1.7) 13.2
N.M. - Not meaningful
Unaudited
KIMBERLY-CLARK CORPORATION
SELECTED BUSINESS SEGMENT DATA
PERIODS ENDED SEPTEMBER 30
PERCENTAGE CHANGE IN NET SALES VERSUS PRIOR YEAR
Three Months Ended September 30, 2008
Net Mix/
Total Volume Price Other(1) Currency
Consolidated 8.2 (1) 4 2 3
Personal Care 11.7 4 4 1 3
Consumer Tissue 5.0 (7) 7 2 3
K-C Professional & Other 8.0 (1) 4 2 3
Health Care 3.7 5 (2) - 1
Nine Months Ended September 30, 2008
Net Mix/
Total Volume Price Other(1) Currency
Consolidated 9.7 2 3 1 4
Personal Care 13.5 7 2 1 4
Consumer Tissue 6.6 (3) 5 1 4
K-C Professional & Other 9.0 1 3 1 4
Health Care 1.7 3 (2) (1) 2
(1) Mix/Other includes rounding.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 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 September 30
2008 2007
Diluted Diluted
Income Earnings Income Earnings
(Expense) Per Share (Expense) Per Share
Adjusted Earnings $424.4 $1.02 $464.8 $1.07
Adjustments for:
Strategic Cost Reduction
charges (11.3) (.03) (20.3) (.05)
Implementation costs - - (1.3) -
Litigation settlement - - 9.9 .02
Net Income $413.1 $.99 $453.1 $1.04
Nine Months Ended September 30
2008 2007
Diluted Diluted
Income Earnings Income Earnings
(Expense) Per Share (Expense) Per Share
Adjusted Earnings $1,314.8 $3.13 $1,418.2 $3.14
Adjustments for:
Strategic Cost Reduction
charges (36.4) (.09) (45.1) (.10)
Implementation costs - - (16.1) (.04)
Litigation settlement - - 9.9 .02
Extraordinary loss (7.7) (.02) - -
Rounding - .01 - .01
Net Income $1,270.7 $3.03 $1,366.9 $3.03
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
OPERATING PROFIT SUMMARY:
Three Months
Ended September 30
2008 2007
Adjusted Operating Profit $625.6 $691.1
Adjustments for:
Strategic Cost Reduction charges (16.1) (22.8)
Implementation costs - (2.0)
Litigation settlement - 16.4
Operating Profit $609.5 $682.7
Nine Months
Ended September 30
2008 2007
Adjusted Operating Profit $1,978.1 $2,037.5
Adjustments for:
Strategic Cost Reduction charges (54.4) (81.2)
Implementation costs - (25.2)
Litigation settlement - 16.4
Operating Profit $1,923.7 $1,947.5
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
Effective Income Tax Rate Reconciliation - Adjustments(1) and Synthetic
Fuel Partnership Activities:
Three Months Ended
September 30, 2008
As Excluding
Reported Adjustments(1)
Income Before Income Taxes $548.9 $565.0
Provision for Income Taxes 154.5 159.2
Effective Income Tax Rate 28.1%
Adjusted Effective Income Tax Rate 28.2%
Three Months Ended September 30, 2007
Synthetic Fuels
As Excluding Effect of Excluding
Reported Adjustments(1) Activities Activities
Income Before Income Taxes $606.9 $615.3 $(6.5) $621.8
Provision for Income Taxes 167.5 164.1 (7.7) 171.8
Net Synthetic Fuel Benefit $1.2
Effective Income Tax Rate 27.6%
Adjusted Effective Income
Tax Rate 26.7% 27.6%
(1) Charges for Strategic Cost Reductions in 2008 and Strategic Cost
Reductions and related implementation costs and a litigation
settlement in 2007.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
Effective Income Tax Rate Reconciliation - Adjustments(1) and Synthetic
Fuel Partnership Activities:
Nine Months Ended
September 30, 2008
As Excluding
Reported Adjustments(1)
Income Before Income Taxes $1,731.3 $1,785.7
Provision for Income Taxes 493.7 511.6
Effective Income Tax Rate 28.5%
Adjusted Effective Income Tax Rate 28.6%
Nine Months Ended September 30, 2007
Synthetic Fuels
As Excluding Effect of Excluding
Reported Adjustments(1) Activities Activities
Income Before Income
Taxes $1,707.8 $1,797.8 $(81.6) $1,879.4
Provision for Income Taxes 391.1 429.7 (101.9) 531.6
Net Synthetic Fuel Benefit $20.3
Effective Income Tax Rate 22.9%
Adjusted Effective Income
Tax Rate 23.9% 28.3%
(1) Charges for Strategic Cost Reductions in 2008 and Strategic Cost
Reductions and related implementation costs and a litigation settlement
in 2007.
KIMBERLY-CLARK CORPORATION
PERIODS ENDED SEPTEMBER 30
OUTLOOK FOR 2008
Estimated Full-Year 2008 Diluted Earnings Per Share:
Adjusted Earnings Per Share $4.15 - $4.20
Adjustments for:
Strategic Cost Reductions (.11) - (.09)
Extraordinary loss (.02) - (.02)
Earnings Per Share - Diluted $4.02 - $4.09
Estimated Fourth Quarter 2008 Diluted Earnings
Per Share:
Adjusted Earnings Per Share $1.02 - $1.07
Adjustments for:
Strategic Cost Reductions (.02) - -
Earnings Per Share - Diluted $1.00 - $1.07
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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