x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
39-0394230
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Three Months
|
||||||
Ended
March 31
|
||||||
(Millions
of dollars, except per share amounts)
|
2008
|
2007
|
||||
Net
Sales
|
$
|
4,812.7
|
$
|
4,385.3
|
||
Cost of products
sold
|
3,357.0
|
3,033.0
|
||||
Gross
Profit
|
1,455.7
|
1,352.3
|
||||
Marketing, research and
general expenses
|
798.4
|
732.6
|
||||
Other (income) and expense,
net
|
(6.8
|
)
|
3.6
|
|||
Operating
Profit
|
664.1
|
616.1
|
||||
Nonoperating
expense
|
-
|
(27.6
|
)
|
|||
Interest
income
|
8.3
|
6.6
|
||||
Interest
expense
|
(74.7
|
)
|
(50.9
|
)
|
||
Income Before Income Taxes and Equity Interests
|
597.7
|
544.2
|
||||
Provision for income
taxes
|
(164.6
|
)
|
(112.1
|
)
|
||
Income
Before Equity Interests
|
433.1
|
432.1
|
||||
Share of net income of equity
companies
|
43.4
|
45.0
|
||||
Minority owners’ share of
subsidiaries’ net income
|
(35.6
|
)
|
(25.1
|
)
|
||
Net
Income
|
$
|
440.9
|
$
|
452.0
|
||
Per
Share Basis:
|
||||||
Net Income
|
||||||
Basic
|
$
|
1.05
|
$
|
.99
|
||
Diluted
|
$
|
1.04
|
$
|
.98
|
||
Cash Dividends
Declared
|
$
|
.58
|
$
|
.53
|
March 31,
|
December 31,
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash and cash
equivalents
|
$
|
524.7
|
$
|
472.7
|
|||
Accounts receivable,
net
|
2,606.8
|
2,560.6
|
|||||
Inventories
|
2,612.6
|
2,443.8
|
|||||
Other current
assets
|
509.0
|
619.5
|
|||||
Total Current
Assets
|
6,253.1
|
6,096.6
|
|||||
Property
|
16,567.5
|
16,243.0
|
|||||
Less accumulated
depreciation
|
8,337.2
|
8,149.0
|
|||||
Net Property
|
8,230.3
|
8,094.0
|
|||||
Investments
in Equity Companies
|
428.6
|
390.0
|
|||||
Goodwill
|
3,013.5
|
2,942.4
|
|||||
Other
Assets
|
986.9
|
916.7
|
|||||
$
|
18,912.4
|
$
|
18,439.7
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Debt payable within one
year
|
$
|
1,282.4
|
$
|
1,097.9
|
|||
Accounts payable
|
1,737.2
|
1,768.3
|
|||||
Accrued expenses
|
1,602.1
|
1,782.8
|
|||||
Other current
liabilities
|
418.4
|
279.6
|
|||||
Total Current
Liabilities
|
5,040.1
|
4,928.6
|
|||||
Long-Term
Debt
|
4,442.6
|
4,393.9
|
|||||
Noncurrent
Employee Benefits
|
1,541.1
|
1,558.5
|
|||||
Long-Term
Income Taxes Payable
|
240.9
|
288.3
|
|||||
Deferred
Income Taxes
|
398.5
|
369.7
|
|||||
Other
Liabilities
|
210.5
|
188.3
|
|||||
Minority
Owners’ Interests in Subsidiaries
|
459.6
|
484.1
|
|||||
Redeemable
Preferred Securities of Subsidiary
|
1,010.9
|
1,004.6
|
|||||
Stockholders’
Equity
|
5,568.2
|
5,223.7
|
|||||
$
|
18,912.4
|
$
|
18,439.7
|
Three Months
|
||||||
Ended March 31
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
||||
Operating
Activities
|
||||||
Net income
|
$
|
440.9
|
$
|
452.0
|
||
Depreciation and
amortization
|
199.5
|
214.6
|
||||
Stock-based
compensation
|
17.6
|
13.9
|
||||
Increase in operating working
capital
|
(230.9
|
)
|
(98.8
|
)
|
||
Deferred income tax
provision
|
8.1
|
(34.9
|
)
|
|||
Net losses on asset
dispositions
|
10.4
|
2.7
|
||||
Equity companies’ earnings in
excess of dividends paid
|
(43.4
|
)
|
(44.0
|
)
|
||
Minority owners’ share of
subsidiaries’ net income
|
35.6
|
25.1
|
||||
Postretirement
benefits
|
(8.1
|
)
|
(11.4
|
)
|
||
Other
|
14.4
|
5.3
|
||||
Cash Provided by
Operations
|
444.1
|
524.5
|
||||
Investing
Activities
|
||||||
Capital spending
|
(221.1
|
)
|
(281.8
|
)
|
||
Acquisition of businesses, net of
cash acquired
|
(16.5
|
)
|
(15.7
|
)
|
||
Proceeds from sales of
investments
|
23.1
|
7.5
|
||||
Proceeds from dispositions of
property
|
-
|
58.0
|
||||
Net decrease in time
deposits
|
47.4
|
42.8
|
||||
Investments in marketable
securities
|
-
|
(3.4
|
)
|
|||
Other
|
(2.5
|
)
|
(5.5
|
)
|
||
Cash Used for
Investing
|
(169.6
|
)
|
(198.1
|
)
|
||
Financing
Activities
|
||||||
Cash dividends
paid
|
(223.7
|
)
|
(224.1
|
)
|
||
Net increase (decrease) in
short-term debt
|
168.2
|
(40.1
|
)
|
|||
Proceeds from issuance of
long-term debt
|
30.9
|
3.9
|
||||
Repayments of long-term
debt
|
(4.0
|
)
|
(5.6
|
)
|
||
Cash paid on redeemable preferred
securities of subsidiary
|
(7.0
|
)
|
-
|
|||
Proceeds from exercise of stock
options
|
54.2
|
101.4
|
||||
Acquisitions of common stock for
the treasury
|
(207.9
|
)
|
(158.5
|
)
|
||
Other
|
(29.5
|
)
|
(24.8
|
)
|
||
Cash Used for
Financing
|
(218.8
|
)
|
(347.8
|
)
|
||
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
(3.7
|
)
|
2.6
|
|||
Increase
(Decrease) in Cash and Cash Equivalents
|
52.0
|
(18.8
|
)
|
|||
Cash
and Cash Equivalents, beginning of year
|
472.7
|
360.8
|
||||
Cash
and Cash Equivalents, end of period
|
$
|
524.7
|
$
|
342.0
|
|
·
|
recognize
100 percent of the fair values of acquired assets, including goodwill, and
assumed liabilities, with only limited exceptions, even if the acquirer
has not acquired 100 percent of the target
entity,
|
|
·
|
fair
value contingent consideration arrangements at the acquisition
date,
|
|
·
|
expense
transaction costs as incurred rather than being considered part of the
fair value of an acquirer’s
interest,
|
|
·
|
fair
value certain preacquisition contingencies, such as environmental or legal
issues,
|
|
·
|
limit
accrual of the costs for a restructuring plan in purchase accounting,
and
|
|
·
|
capitalize
the value of acquired research and development as an indefinite-lived
intangible asset, subject to impairment accounting, rather than being
expensed at the acquisition date.
|
|
·
|
Noncontrolling
interests are reported as an element of consolidated equity, thereby
eliminating the current practice of classifying minority owners’ interests
within a mezzanine section of the balance
sheet.
|
|
·
|
The
current practice of reporting minority owners’ share of subsidiaries’ net
income will change. Reported net income will consist of the
total income of all consolidated subsidiaries, with separate disclosure on
the face of the income statement of the split of that income between the
controlling and noncontrolling
interests.
|
|
·
|
Increases
and decreases in the noncontrolling ownership interest amount will be
accounted for as equity transactions. If the controlling
interest loses control and deconsolidates a subsidiary, full gain or loss
on the transition will be
recognized.
|
|
·
|
Noncontrolling
interests are required to be reclassified from the mezzanine to equity,
separate from the parent’s shareholders’ equity, in the consolidated
balance sheet.
|
|
·
|
Consolidated
net income must be recast to include net income attributable to both
controlling and noncontrolling
interests.
|
Fair
Value Measurements
|
|||||||||||
(Millions
of dollars)
|
March
31, 2008
|
Level
1
|
Level
2
|
||||||||
Assets
|
|||||||||||
Company-owned
life insurance (“COLI”)
|
$ 48.6
|
$ -
|
$ 48.6
|
||||||||
Available-for-sale
securities
|
7.8
|
7.8
|
-
|
||||||||
Derivatives
|
59.1
|
-
|
59.1
|
||||||||
Total
|
$
115.5
|
$
7.8
|
$
107.7
|
||||||||
Liabilities
|
|||||||||||
Derivatives
|
$ 43.9
|
$ -
|
$ 43.9
|
Three
Months Ended March 31
|
|||||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||||
Noncash
charges
|
$
|
6.3
|
$
|
23.9
|
|||||
Charges
for workforce reductions
|
9.4
|
4.6
|
|||||||
Other
cash charges
|
4.8
|
8.4
|
|||||||
Charges
for special pension and other benefits
|
3.3
|
3.7
|
|||||||
Total
pretax charges
|
$
|
23.8
|
$
|
40.6
|
Three
Months Ended March 31
|
|||||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||||
Incremental
depreciation
|
$
|
3.7
|
$
|
30.4
|
|||||
Asset
write-offs
|
1.9
|
3.3
|
|||||||
Net
loss (gain) on asset dispositions
|
.7
|
(9.8
|
)
|
||||||
Total
noncash charges
|
$
|
6.3
|
$
|
23.9
|
(Millions
of dollars)
|
2008
|
2007
|
|||||||
Accrued
expenses – beginning of the year
|
$
|
53.8
|
$
|
111.2
|
|||||
Charges
for workforce reductions
|
9.4
|
4.6
|
|||||||
Other
cash charges
|
4.8
|
8.4
|
|||||||
Cash
payments
|
(27.1
|
)
|
(36.0
|
)
|
|||||
Currency
|
1.3
|
2.6
|
|||||||
Accrued
expenses at March 31
|
$
|
42.2
|
$
|
90.8
|
Three
Months Ended March 31
|
|||||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||||
Cost
of products sold
|
$
|
11.8
|
$
|
41.8
|
|||||
Marketing,
research and general expenses
|
11.3
|
8.1
|
|||||||
Other
(income) and expense, net
|
.7
|
(9.3
|
)
|
||||||
Pretax charges
|
23.8
|
40.6
|
|||||||
Provision
for income taxes
|
(7.7
|
)
|
(25.6
|
)
|
|||||
Total after-tax
charges
|
$
|
16.1
|
$
|
15.0
|
2008
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation
|
$
|
1.6
|
$
|
2.1
|
$
|
-
|
$
|
3.7
|
||||||
Asset
write-offs
|
1.9
|
-
|
-
|
1.9
|
||||||||||
Charges
for workforce reductions and
|
||||||||||||||
special pension and other
benefits
|
6.9
|
5.4
|
.4
|
12.7
|
||||||||||
Loss on asset disposal and other charges
|
3.8
|
1.4
|
.3
|
5.5
|
||||||||||
Total charges
|
$
|
14.2
|
$
|
8.9
|
$
|
.7
|
$
|
23.8
|
2007
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation
|
$
|
15.9
|
$
|
13.0
|
$
|
1.5
|
$
|
30.4
|
||||||
Asset
write-offs
|
1.8
|
1.4
|
.1
|
3.3
|
||||||||||
Charges
for workforce reductions and
|
||||||||||||||
special pension and other
benefits
|
6.3
|
1.7
|
.3
|
8.3
|
||||||||||
Loss
(gain) on asset disposal and other charges
|
3.2
|
(3.4
|
)
|
(1.2
|
)
|
(1.4
|
)
|
|||||||
Total charges
|
$
|
27.2
|
$
|
12.7
|
$
|
.7
|
$
|
40.6
|
March 31,
|
December 31,
|
||||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||||
At lower of cost on the First-In, First-Out (FIFO) method or market:
|
|||||||||
Raw
materials
|
$
|
500.7
|
$
|
476.3
|
|||||
Work
in process
|
377.5
|
357.3
|
|||||||
Finished
goods
|
1,685.2
|
1,564.1
|
|||||||
Supplies
and other
|
273.1
|
261.0
|
|||||||
2,836.5
|
2,658.7
|
||||||||
Excess
of FIFO cost over Last-In, First-Out (LIFO) cost
|
(223.9
|
)
|
(214.9
|
)
|
|||||
Total
|
$
|
2,612.6
|
$
|
2,443.8
|
(Millions
of dollars)
|
Three
Months Ended
March
31, 2007
|
||||||
Nonoperating
expense
|
$
|
(27.6
|
)
|
||||
Tax
credits
|
$
|
25.6
|
|||||
Tax
benefit of nonoperating expense
|
9.1
|
34.7
|
|||||
Net
synthetic fuel benefit
|
$
|
7.1
|
|||||
Per
share basis – diluted
|
$
|
.02
|
Defined
|
Other Postretirement
|
|||||||||||
Benefit Plans
|
Benefit Plans
|
|||||||||||
Three Months Ended March 31
|
||||||||||||
(Millions
of dollars)
|
2008
|
2007
|
2008
|
2007
|
||||||||
Service
cost
|
$
|
19.7
|
$
|
21.4
|
$
|
3.3
|
$
|
3.4
|
||||
Interest
cost
|
82.3
|
78.7
|
13.2
|
12.1
|
||||||||
Expected
return on plan assets
|
(94.3
|
)
|
(92.1
|
)
|
-
|
-
|
||||||
Recognized
net actuarial loss
|
14.1
|
19.3
|
.9
|
.8
|
||||||||
Other
|
4.2
|
5.0
|
.8
|
.8
|
||||||||
Net
periodic benefit cost
|
$
|
26.0
|
$
|
32.3
|
$
|
18.2
|
$
|
17.1
|
Average Common Shares
|
|||||
Outstanding for the Three
|
|||||
Months Ended March 31
|
|||||
(Millions
of shares)
|
2008
|
2007
|
|||
Basic
|
420.2
|
455.8
|
|||
Dilutive
effect of stock options
|
1.6
|
2.7
|
|||
Dilutive
effect of restricted share and restricted share unit
awards
|
1.2
|
1.4
|
|||
Diluted
|
423.0
|
459.9
|
Three Months
|
||||||
Ended
March 31
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
||||
Net
income
|
$
|
440.9
|
$
|
452.0
|
||
Unrealized
currency translation adjustments
|
300.8
|
68.3
|
||||
Employee
postretirement benefits, net
|
(1.1
|
)
|
36.8
|
|||
Deferred
(losses) gains on cash flow hedges, net of tax
|
(21.5
|
)
|
3.5
|
|||
Unrealized
holding losses on available-for-sale securities
|
(.8
|
)
|
-
|
|||
Comprehensive
income
|
$
|
718.3
|
$
|
560.6
|
·
|
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.
|
Three Months
|
||||||
Ended
March 31
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
||||
NET
SALES:
|
||||||
Personal
Care
|
$
|
2,046.1
|
$
|
1,797.6
|
||
Consumer
Tissue
|
1,707.0
|
1,593.1
|
||||
K-C
Professional & Other
|
761.0
|
697.4
|
||||
Health
Care
|
297.9
|
302.7
|
||||
Corporate
& Other
|
21.8
|
8.0
|
||||
Intersegment
sales
|
(21.1
|
)
|
(13.5
|
)
|
||
Consolidated
|
$
|
4,812.7
|
$
|
4,385.3
|
Three Months
|
||||||
Ended
March 31
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
||||
OPERATING
PROFIT (reconciled to income before income taxes):
|
||||||
Personal
Care
|
$
|
428.2
|
$
|
347.2
|
||
Consumer
Tissue
|
155.5
|
207.1
|
||||
K-C
Professional & Other
|
96.7
|
108.7
|
||||
Health
Care
|
46.2
|
55.6
|
||||
Other
income and (expense), net (a)
|
6.8
|
(3.6
|
)
|
|||
Corporate
& Other (a)
(b)
|
(69.3
|
)
|
(98.9
|
)
|
||
Total
Operating Profit
|
664.1
|
616.1
|
||||
Nonoperating
expense
|
-
|
(27.6
|
)
|
|||
Interest
income
|
8.3
|
6.6
|
||||
Interest
expense
|
(74.7
|
)
|
(50.9
|
)
|
||
Income
Before Income Taxes
|
$
|
597.7
|
$
|
544.2
|
|
Notes:
|
(a)
|
Other
income and (expense), net and Corporate & Other include the following
amounts of pretax charges for the
strategic cost reductions:
|
Three
Months
|
||||||
Ended
March 31
|
||||||
(Millions
of dollars)
|
2008
|
2007
|
||||
Other
income and (expense), net
|
$
|
(.7
|
)
|
$
|
9.3
|
|
Corporate
& Other
|
(23.1
|
)
|
(49.9
|
)
|
(b)
|
In
2007, Corporate & Other also includes incremental implementation costs
of $12.2 million related to the transfer of certain administrative
processes to third-party providers.
|
Three
Months
|
|||||||
Ended
March 31
|
|||||||
(Millions
of dollars)
|
2008
|
2007
|
|||||
Personal
Care
|
$
|
10.9
|
$
|
20.4
|
|||
Consumer
Tissue
|
5.2
|
15.9
|
|||||
K-C
Professional & Other
|
1.4
|
2.6
|
|||||
Health
Care
|
6.3
|
1.7
|
|||||
Total
|
$
|
23.8
|
$
|
40.6
|
·
|
Overview
of First Quarter 2008 Results
|
·
|
Results
of Operations and Related
Information
|
·
|
Liquidity
and Capital Resources
|
·
|
New
Accounting Standards
|
·
|
Environmental
Matters
|
·
|
Business
Outlook
|
·
|
Net
sales increased 9.7 percent.
|
·
|
Operating
profit increased 7.8 percent, however, net income decreased by 2.5
percent.
|
·
|
Cash
provided by operations was $444.1
million.
|
Net
Sales
|
2008
|
2007
|
||||
Personal
Care
|
$
|
2,046.1
|
$
|
1,797.6
|
||
Consumer
Tissue
|
1,707.0
|
1,593.1
|
||||
K-C
Professional & Other
|
761.0
|
697.4
|
||||
Health
Care
|
297.9
|
302.7
|
||||
Corporate
& Other
|
21.8
|
8.0
|
||||
Intersegment
sales
|
(21.1
|
)
|
(13.5
|
)
|
||
Consolidated
|
$
|
4,812.7
|
$
|
4,385.3
|
Percent Change in Net Sales Versus Prior Year
|
||||||||||||||
Change Due To
|
||||||||||||||
Total
|
Volume
|
Net
|
||||||||||||
Change
|
Growth
|
Price
|
Currency
|
Other
|
||||||||||
Consolidated
|
9.7
|
3
|
2
|
4
|
1
|
|||||||||
Personal
Care
|
13.8
|
7
|
1
|
5
|
1
|
|||||||||
Consumer
Tissue
|
7.1
|
(1
|
)
|
3
|
4
|
1
|
||||||||
K-C
Professional & Other
|
9.1
|
2
|
2
|
5
|
-
|
|||||||||
Health
Care
|
(1.6
|
)
|
(1
|
)
|
(2
|
)
|
2
|
(
|
1)
|
·
|
Net
sales of personal care products climbed 13.8 percent in the first
quarter. Sales volumes rose 7 percent, while net selling prices
and product mix both improved about 1 percent and currency effects added
approximately 5 percent to net
sales.
|
|
Personal
care net sales in North America were up about 6 percent compared with
the first quarter of 2007, driven by increased sales volumes and net
selling prices, up approximately 4 percent and 2 percent,
respectively. Sales volumes improved across most categories,
paced by double-digit growth for the Corporation’s Depend and Poise
incontinence care brands and mid-single digit growth for Huggies baby
wipes. In diapers and child care, sales volumes rose about 2
percent in comparison to strong increases in the year-ago
quarter. Child care volumes benefited from continued growth in
higher-margin, super premium GoodNites Sleep Boxers and Sleep
Shorts. Selling prices were higher primarily as a result of
price increases for diaper and child care products implemented during the
first quarter in the U.S.
|
|
In
Europe, personal care net sales were up 8 percent in the quarter, as
favorable currency effects boosted sales by about 11
percent. Increased sales volumes of 1 percent were more than
offset by a 3 percent decline in net selling prices and slightly
lower product mix. The volume gain reflects higher sales of
Huggies diapers and baby wipes, Pull-Ups training pants and DryNites youth
pants across the region. However, competitive promotional
activity in diapers affected net selling prices and also contributed to a
2 percent decline in sales volumes of Huggies diapers in the Corporation’s
four core markets – U.K., France, Italy and Spain. In
developing and emerging markets, personal care net sales increased
nearly 26 percent, representing the fourteenth consecutive quarter of
double-digit growth, as the Corporation is benefiting from strong product
and customer programs in rapidly-growing markets. Sales volumes
increased more than 13 percent and the mix of products sold improved about
3 percent, while net selling prices went up 2 percent. Stronger
foreign currencies benefited net sales by approximately 8
percent. The growth in sales volumes was broad-based, with
particular strength throughout most of Latin America and in South Korea,
China, Russia, Turkey and Vietnam.
|
·
|
Net
sales of consumer tissue products were 7.1 percent above the first quarter
of 2007. Although overall sales volumes declined 1 percent
versus the prior year, net selling prices and product mix improved by 3
percent and 1 percent, respectively, and favorable currency exchange rates
benefited net sales by 4 percent.
|
|
In
North America, net sales of consumer tissue products rose slightly in the
first quarter, as an increase in net selling prices of more than 2 percent
and favorable product mix of 1 percent were mostly offset by a 3 percent
decline in sales volumes. The decrease in sales volumes was
driven primarily by the Corporation’s decision to shed certain low-margin
business as a part of the Corporation’s overall focus on improving revenue
realization and to support continued growth of Scott bathroom tissue and
other higher-margin offerings. Sales volumes of Kleenex facial
tissue were essentially even with the year-ago quarter, as the cold and
flu season recovered from the weakness experienced in the fourth quarter
of last year. The increase in net selling prices includes the
benefit from price increases for bathroom tissue and paper towels in the
U.S. that were successfully implemented
mid-quarter.
|
|
In
Europe, consumer tissue net sales rose about
13 percent. Currency exchange rates strengthened by an
average of almost 9 percent, accounting for a majority of the
increase. Sales volumes were up approximately 6 percent,
on higher sales of Kleenex facial tissue and Andrex bathroom tissue,
partially offset by declines of 1 percent each in net selling prices
and product mix. Consumer tissue net sales in developing and
emerging markets rose approximately 16 percent. Net
selling prices and product mix improved 8 percent and 1 percent,
respectively, while sales volumes were down more than 2
percent. This reflects the Corporation’s strategy to raise
prices in response to higher raw materials costs and to shift mix to more
differentiated, higher-margin products. Favorable currency
effects added about 9 percent to net
sales.
|
·
|
Net
sales of K-C Professional (KCP) & Other products advanced
9.1 percent compared with the year-ago quarter. Sales
volumes and net selling prices both were approximately 2 percent better
than the prior year, while changes in foreign currency rates benefited net
sales by about 5 percent. KCP continued to post strong sales
volume gains in Latin America and volumes were up 2 percent in North
America and 4 percent in Europe, reflecting continued growth of the
Kleenex, Scott and Cottonelle washroom brands and Kimtech and WypAll wiper
products. Net selling prices were higher in every region around
the world as a result of increases implemented over the past
year.
|
·
|
Net
sales of health care products decreased 1.6 percent in the first
quarter. Net selling prices declined by approximately 2 percent
and sales volumes and product mix were both lower by about 1 percent,
partially offset by currency benefits of 2 percent. The volume
and price declines were mainly attributable to competitive conditions
affecting surgical supplies in North America, along with lower demand for
face masks globally due to avian flu preparedness in
2007. Meanwhile, sales of higher-margin medical devices,
particularly Ballard respiratory catheters, continued to generate
improvement in net sales.
|
Net
Sales
|
2008
|
2007
|
||||
North
America
|
$
|
2,550.5
|
$
|
2,472.7
|
||
Outside
North America
|
2,432.2
|
2,058.0
|
||||
Intergeographic
sales
|
(170.0
|
)
|
(145.4
|
)
|
||
Consolidated
|
$
|
4,812.7
|
$
|
4,385.3
|
|
·
|
Net
sales in North America increased 3.1 percent primarily due to the higher
personal care sales volumes and the higher net selling prices for both
personal care and consumer tissue. These gains were partially
offset by the lower consumer tissue sales
volumes.
|
|
·
|
Net
sales outside of North America increased 18.2 percent because of the
previously mentioned strength in the developing and emerging markets, and
favorable currency effects in Europe, Australia and
Brazil.
|
Operating
Profit
|
2008
|
2007
|
||||
Personal
Care
|
$
|
428.2
|
$
|
347.2
|
||
Consumer
Tissue
|
155.5
|
207.1
|
||||
K-C
Professional & Other
|
96.7
|
108.7
|
||||
Health
Care
|
46.2
|
55.6
|
||||
Other
income and (expense), net (a)
|
6.8
|
(3.6
|
)
|
|||
Corporate
& Other (a)
(b)
|
(69.3
|
)
|
(98.9
|
)
|
||
Consolidated
|
$
|
664.1
|
$
|
616.1
|
(a)
|
Other
income and (expense), net and Corporate & Other include the following
pretax amounts for the
strategic cost reductions:
|
(Millions
of dollars)
|
2008
|
2007
|
||||
Other
income and (expense), net
|
$
|
(.7
|
)
|
$
|
9.3
|
|
Corporate
& Other
|
(23.1
|
)
|
(49.9
|
)
|
(b)
|
In
2007, Corporate & Other also includes incremental implementation costs
of $12.2 million related to the transfer of certain administrative
processes to third-party providers.
|
Percentage Change in Operating Profit Versus Prior
Year
|
|||||||||||||||||||||||||||
Change Due To
|
|||||||||||||||||||||||||||
Raw
|
Energy and
|
||||||||||||||||||||||||||
Total
|
Net
|
Materials
|
Distribution
|
||||||||||||||||||||||||
Change
|
Volume
|
Price
|
Cost
|
Expense
|
Currency
|
Other
(a)
|
|||||||||||||||||||||
Consolidated
|
7.8
|
9
|
13
|
(21
|
)
|
(6
|
)
|
9
|
4
|
(b)
|
|||||||||||||||||
Personal
Care
|
23.3
|
16
|
8
|
(14
|
)
|
(3
|
)
|
5
|
11
|
||||||||||||||||||
Consumer
Tissue
|
(24.9
|
)
|
1
|
21
|
(28
|
)
|
(11
|
)
|
1
|
(9
|
)
|
||||||||||||||||
K-C
Professional &
Other
|
(11.0
|
)
|
3
|
14
|
(21
|
)
|
(5
|
)
|
5
|
(7
|
)
|
||||||||||||||||
Health
Care
|
(16.9
|
)
|
(4
|
)
|
(8
|
)
|
(1
|
)
|
(1
|
)
|
7
|
(10
|
)
|
(a)
|
Includes
cost savings.
|
(b)
|
Charges
for the strategic cost reductions were $17 million lower in 2008 than
in 2007.
|
·
|
Personal
care segment operating profit increased 23.3 percent as the benefits of
the increased net sales, cost savings and favorable currency effects more
than offset the increased materials cost inflation. Similarly,
in North America, operating profit increased due to higher sales volumes,
increased net selling prices and cost savings, tempered by cost
inflation. In Europe, operating profit rose primarily because
of cost savings. Operating profit in the developing and
emerging markets increased due to the higher sales volumes and increased
net selling prices, tempered by higher marketing and general
expenses.
|
·
|
Consumer
tissue segment operating profit declined 24.9 percent as higher net
selling prices and cost savings were more than offset by higher raw
materials, energy and distribution costs. In both North America
and Europe, operating profit decreased due to the same factors that
affected the overall segment. In the developing and emerging
markets, operating profit decreased as higher net selling prices were more
than offset by cost inflation and increased marketing and general
expenses.
|
·
|
Operating
profit for K-C Professional & Other products decreased 11.0 percent
because higher net selling prices were more than offset by cost inflation,
primarily for waste paper, and increased mill maintenance
expense.
|
·
|
Health
care segment operating profit declined 16.9 percent principally due to the
lower sales volumes and net selling prices, and less favorable product
mix. In addition, marketing, research and general expenses
increased in support of capability
building.
|
·
|
Other
income and (expense), net for 2008 includes foreign currency transaction
gains of approximately $12 million versus losses of about $10 million in
2007. Gains of more than $9 million on properties disposed
of as part of the strategic cost reduction plan are also included in
2007.
|
Operating
Profit
|
2008
|
2007
|
||||
North
America
|
$
|
468.6
|
$
|
490.9
|
||
Outside
North America
|
258.0
|
227.7
|
||||
Other
income and (expense), net (a)
|
6.8
|
(3.6
|
)
|
|||
Corporate
& Other (a)
(b)
|
(69.3
|
)
|
(98.9
|
)
|
||
Consolidated
|
$
|
664.1
|
$
|
616.1
|
(a)
|
Other
income and (expense), net and Corporate & Other include the following
pretax amounts for the
strategic cost reductions:
|
(Millions
of dollars)
|
2008
|
2007
|
|||||
Other
income and (expense), net
|
$
|
(.7
|
)
|
$
|
9.3
|
||
Corporate
& Other
|
(23.1
|
)
|
(49.9
|
)
|
(b)
|
In
2007, Corporate & Other also includes incremental implementation costs
of $12.2 million related to the transfer of certain administrative
processes to third-party providers.
|
·
|
Operating
profit in North America decreased 4.5 percent as the higher personal care
sales volumes, increased net selling prices and overall cost savings were
more than offset by cost inflation.
|
·
|
Operating
profit outside North America increased 13.3 percent primarily due to the
higher earnings in the developing and emerging
markets.
|
·
|
Nonoperating
expense of $27.6 million for the first quarter of 2007 was the
Corporation’s pretax loss associated with its ownership interest in the
synthetic fuel partnerships described in Note 5 to the Consolidated
Financial Statements. No expense is reflected for 2008 since
the law giving rise to the related tax benefits for these investments
expired at the end of 2007.
|
·
|
Interest
expense for the first quarter of 2008 increased approximately $24 million
from the prior year, primarily as a result of long-term debt issued to
fund the Corporation’s $2.0 billion accelerated share repurchase (“ASR”)
program in July, 2007, partially offset by lower interest
rates.
|
·
|
The
Corporation’s effective income tax rate was 27.5 percent in 2008 compared
with 20.6 percent in 2007. The increase in 2008 was
primarily due to the benefit of synthetic fuel credits and favorable
settlements of tax issues in 2007.
|
·
|
The
Corporation’s share of net income of equity companies in the first quarter
of 2008 decreased to about $43 million from $45 million in 2007, due
mainly to lower net income at Kimberly-Clark de Mexico, S.A.B. de C.V.,
where sales growth of about 9 percent was more than offset by
significantly higher raw materials costs and an increase in the effective
tax rate.
|
·
|
Minority
owners’ share of subsidiaries’ net income was almost $36 million in the
first quarter of 2008 compared with approximately $25 million in the prior
year. The increase was attributable to minority owners’ share
of increased earnings at majority-owned subsidiaries in Latin America,
Asia and the Middle East, and higher returns on the redeemable preferred
securities of the Corporation’s consolidated foreign financing
subsidiary.
|
·
|
As
a result of the Corporation’s ongoing share repurchase program, including
the ASR program, the average number of common shares outstanding declined,
which benefited first quarter 2008 net income by $.08 per
share. This benefit was mostly offset by the higher
interest expense associated with the July 2007 debt
issuances. See Note 9 to the Consolidated Financial Statements
for detail on the ASR program.
|
·
|
Cash
provided by operations in the first quarter decreased to $444 million
from $525 million in 2007, primarily because of an increased
investment in working capital, principally in
inventory.
|
·
|
Capital
spending for the first quarter was $221 million in 2008 compared with
$282 million in the prior year. The Corporation still
expects capital spending in 2008 will be in a range of $850 to
$950 million.
|
·
|
At
March 31, 2008, total debt and redeemable preferred securities was
$6.7 billion compared with $6.5 billion at the end of
2007.
|
·
|
During
the first quarter of 2008, the Corporation repurchased approximately
3.1 million shares of its common stock at a cost of about $200
million, in line with the Corporation’s target to repurchase $800 million
to $1 billion worth of its shares in
2008.
|
·
|
Management
believes that the Corporation’s ability to generate cash from operations
and its capacity to issue short-term and long-term debt are adequate to
fund working capital, capital spending, payment of dividends, repurchases
of common stock and other needs in the foreseeable
future.
|
Maximum
|
||||||||||||||
Number
of
|
||||||||||||||
Shares
|
||||||||||||||
That
May
|
||||||||||||||
Total
Number of
|
Yet
Be
|
|||||||||||||
Shares Purchased
|
Purchased
|
|||||||||||||
Total
Number
|
Average
|
as
Part of Publicly
|
Under
the
|
|||||||||||
Period
|
of
Shares
|
Price
Paid
|
Announced
Plans or
|
Plans
or
|
||||||||||
(2008)
|
Purchased(1)
|
Per Share
|
Programs
|
Programs
|
||||||||||
January
1 to 31
|
776,000
|
$
|
66.27
|
8,790,411
|
41,209,589
|
|||||||||
February
1 to 29
|
1,141,000
|
65.11
|
9,931,411
|
40,068,589
|
||||||||||
March
1 to 31
|
1,157,000
|
64.26
|
11,088,411
|
38,911,589
|
||||||||||
Total
|
3,074,000
|
|
(1)
|
Share
repurchases were made pursuant to a share repurchase program authorized by
the Corporation’s Board of Directors on July 23, 2007, which allows for
the repurchase of 50 million shares in an amount not to exceed
$5 billion.
|
Votes
|
|||||||
Nominee
|
Votes For
|
Against
|
Abstain
|
||||
John
R. Alm
|
374,887,943
|
2,558,756
|
3,273,056
|
||||
John
F. Bergstrom
|
353,235,762
|
24,234,312
|
3,249,681
|
||||
Robert
W. Decherd
|
374,291,085
|
3,154,431
|
3,274,239
|
||||
Ian
C. Read
|
374,827,129
|
2,618,630
|
3,273,996
|
||||
G.
Craig Sullivan
|
375,070,247
|
2,388,200
|
3,261,308
|
Votes
|
Broker
|
||||||||
Proposal
|
Votes For
|
Against
|
Abstain
|
Non-votes
|
|||||
Ratification
of Auditors
|
371,311,483
|
5,933,054
|
3,475,218
|
0
|
|||||
Approval
of Amended and Restated Certificate of Incorporation to Eliminate
Supermajority Voting Provisions
|
372,770,134
|
3,863,257
|
4,086,364
|
0
|
|||||
Stockholder
Proposal Regarding Qualifications for Director Nominees
|
7,481,744
|
324,110,004
|
5,155,142
|
43,972,865
|
|||||
Stockholder
Proposal Regarding Adoption of Global Human Rights Standards Based on
International Labor Conventions
|
28,059,325
|
264,392,294
|
44,294,571
|
43,973,565
|
|||||
Stockholder
Proposal Regarding Special Shareholder Meetings
|
202,836,030
|
129,463,753
|
4,447,107
|
43,972,865
|
|||||
Stockholder
Proposal Regarding Cumulative Voting
|
138,727,323
|
193,649,680
|
4,369,887
|
43,972,865
|
|||||
Stockholder
Proposal Regarding Amendment of Bylaws to Establish a Board Committee on
Sustainability
|
14,375,210
|
282,012,166
|
40,359,513
|
43,972,865
|
(a)
|
Exhibits
|
|
(3)a
|
Amended
and Restated Certificate of Incorporation, dated April 17, 2008,
filed herewith.
|
|
(3)b
|
By-Laws,
as amended September 14, 2006, incorporated by reference to
Exhibit No. (3)b of the Corporation’s Current Report on
Form 8-K dated September 18,
2006.
|
|
(4)
|
Copies
of instruments defining the rights of holders of long-term debt will be
furnished to the Securities and Exchange Commission on
request.
|
|
(10)c
|
Seventh
Amended and Restated Deferred Compensation Plan for Directors, effective
January 1, 2008, filed herewith.
|
|
(10)m
|
2001
Equity Participation Plan, as amended, dated April 16, 2008, filed
herewith.
|
|
(10)n
|
Form
of Award Agreements under 2001 Equity Participation Plan, filed
herewith.
|
|
(10)r
|
Letter
Agreement between Kimberly-Clark Corporation and Tony Palmer, filed
herewith.
|
|
(31)a
|
Certification
of Chief Executive Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), filed
herewith.
|
|
(31)b
|
Certification
of Chief Financial Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act, filed
herewith.
|
|
(32)a
|
Certification
of Chief Executive Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code, furnished
herewith.
|
|
(32)b
|
Certification
of Chief Financial Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code, furnished
herewith.
|
By:
|
/s/ Mark A.
Buthman
|
Mark
A. Buthman
|
|
Senior
Vice President and
|
|
Chief
Financial Officer
|
|
(principal
financial officer)
|
By:
|
/s/ Randy J.
Vest
|
Randy
J. Vest
|
|
Vice
President and Controller
|
|
(principal
accounting officer)
|
|
Exhibit
No.
|
Description
|
(3)a
|
Amended
and Restated Certificate of Incorporation, dated April 17, 2008,
filed herewith.
|
(3)b
|
By-Laws,
as amended September 14, 2006, incorporated by reference to
Exhibit No. (3)b of the Corporation’s Current Report on
Form 8-K dated
September 18, 2006.
|
(4)
|
Copies
of instruments defining the rights of holders of long-term debt will be
furnished to the Securities and Exchange Commission on
request.
|
(10)c
|
Seventh
Amended and Restated Deferred Compensation Plan for Directors, effective
January 1, 2008, filed herewith.
|
(10)m
|
2001
Equity Participation Plan, as amended, dated April 16, 2008, filed
herewith.
|
(10)n
|
Form
of Award Agreements under 2001 Equity Participation Plan, filed
herewith.
|
(10)r
|
Letter
Agreement between Kimberly-Clark Corporation and Tony Palmer, filed
herewith.
|
(31)a
|
Certification
of Chief Executive Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), filed
herewith.
|
(31)b
|
Certification
of Chief Financial Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act, filed
herewith.
|
(32)a
|
Certification
of Chief Executive Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code, furnished
herewith.
|
(32)b
|
Certification
of Chief Financial Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code, furnished
herewith.
|