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
|
Nine Months Ended
|
||||||||||||
September 30
|
September 30
|
||||||||||||
(Millions
of dollars, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Net
Sales
|
$
|
4,620.6
|
$
|
4,210.4
|
$
|
13,507.9
|
$
|
12,439.7
|
|||||
Cost
of products
sold
|
3,177.1
|
2,934.9
|
9,266.1
|
8,723.5
|
|||||||||
Gross
Profit
|
1,443.5
|
1,275.5
|
4,241.8
|
3,716.2
|
|||||||||
Marketing,
research and general
expenses
|
783.7
|
749.2
|
2,313.9
|
2,203.6
|
|||||||||
Other
(income) and expense,
net
|
(22.9
|
)
|
(.1
|
)
|
(19.6
|
)
|
21.7
|
||||||
Operating
Profit
|
682.7
|
526.4
|
1,947.5
|
1,490.9
|
|||||||||
Nonoperating
expense
|
(6.5
|
)
|
(17.2
|
)
|
(81.6
|
)
|
(40.6
|
)
|
|||||
Interest
income
|
9.3
|
6.8
|
23.3
|
19.8
|
|||||||||
Interest
expense
|
(78.6
|
)
|
(56.5
|
)
|
(181.4
|
)
|
(165.9
|
)
|
|||||
Income
Before Income Taxes and
|
|||||||||||||
Equity
Interests
|
606.9
|
459.5
|
1,707.8
|
1,304.2
|
|||||||||
Provision
for income
taxes
|
(167.5
|
)
|
(114.6
|
)
|
(391.1
|
)
|
(344.9
|
)
|
|||||
Income
Before Equity Interests
|
439.4
|
344.9
|
1,316.7
|
959.3
|
|||||||||
Share
of net income of equity
companies
|
39.1
|
42.8
|
126.9
|
124.7
|
|||||||||
Minority
owners’ share of
subsidiaries’ net
|
|||||||||||||
income
|
(25.4
|
)
|
(23.5
|
)
|
(76.7
|
)
|
(67.1
|
)
|
|||||
Net
Income
|
$
|
453.1
|
$
|
364.2
|
$
|
1,366.9
|
$
|
1,016.9
|
|||||
Per
Share Basis:
|
|||||||||||||
Net
Income
|
|||||||||||||
Basic
|
$
|
1.05
|
$
|
.80
|
$
|
3.05
|
$
|
2.22
|
|||||
Diluted
|
$
|
1.04
|
$
|
.79
|
$
|
3.03
|
$
|
2.21
|
|||||
Cash
Dividends
Declared
|
$
|
.53
|
$
|
.49
|
$
|
1.59
|
$
|
1.47
|
September 30,
|
December 31,
|
||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash
equivalents
|
$
|
539.6
|
$
|
360.8
|
|||
Accounts
receivable,
net
|
2,516.9
|
2,336.7
|
|||||
Inventories
|
2,386.3
|
2,004.5
|
|||||
Other
current
assets
|
568.9
|
567.7
|
|||||
Total
Current
Assets
|
6,011.7
|
5,269.7
|
|||||
Property
|
16,074.3
|
15,404.9
|
|||||
Less
accumulated
depreciation
|
8,098.3
|
7,720.1
|
|||||
Net
Property
|
7,976.0
|
7,684.8
|
|||||
Investments
in Equity Companies
|
427.5
|
392.9
|
|||||
Goodwill
|
3,028.8
|
2,860.5
|
|||||
Other
Assets
|
880.3
|
859.1
|
|||||
$
|
18,324.3
|
$
|
17,067.0
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Debt
payable within one
year
|
$
|
1,395.9
|
$
|
1,326.4
|
|||
Accounts
payable
|
1,713.6
|
1,530.8
|
|||||
Accrued
expenses
|
1,675.4
|
1,603.8
|
|||||
Other
current
liabilities
|
283.6
|
554.8
|
|||||
Total
Current
Liabilities
|
5,068.5
|
5,015.8
|
|||||
Long-Term
Debt
|
4,379.3
|
2,276.0
|
|||||
Noncurrent
Employee Benefits
|
1,863.4
|
1,887.6
|
|||||
Deferred
Income Taxes
|
215.9
|
391.1
|
|||||
Other
Liabilities
|
531.0
|
183.1
|
|||||
Minority
Owners’ Interests in Subsidiaries
|
447.8
|
422.6
|
|||||
Preferred
Securities of Subsidiary
|
821.5
|
793.4
|
|||||
Stockholders’
Equity
|
4,996.9
|
6,097.4
|
|||||
$
|
18,324.3
|
$
|
17,067.0
|
Nine Months
|
|||||||
Ended September 30
|
|||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||
Operating
Activities
|
|||||||
Net
income
|
$
|
1,366.9
|
$
|
1,016.9
|
|||
Depreciation
and
amortization
|
626.4
|
714.5
|
|||||
Asset
impairment
|
-
|
3.4
|
|||||
Stock-based
compensation
|
48.6
|
53.0
|
|||||
Changes
in operating working
capital
|
(295.8
|
)
|
54.6
|
||||
Deferred
income
taxes
|
(67.0
|
)
|
(217.8
|
)
|
|||
Net
losses on asset
dispositions
|
28.3
|
81.4
|
|||||
Equity
companies’ earnings in
excess of dividends paid
|
(62.9
|
)
|
(62.0
|
)
|
|||
Minority
owners’ share of
subsidiaries’ net income
|
76.7
|
67.1
|
|||||
Postretirement
benefits
|
6.4
|
62.8
|
|||||
Other
|
16.0
|
(7.4
|
)
|
||||
Cash
Provided by
Operations
|
1,743.6
|
1,766.5
|
|||||
Investing
Activities
|
|||||||
Capital
spending
|
(776.8
|
)
|
(639.0
|
)
|
|||
Acquisition
of businesses, net of
cash acquired
|
(15.7
|
)
|
-
|
||||
Proceeds
from sales of
investments
|
34.1
|
29.4
|
|||||
Proceeds
from dispositions of
property
|
70.9
|
32.3
|
|||||
Net
decrease (increase) in time
deposits
|
1.6
|
(16.0
|
)
|
||||
Investments
in marketable
securities
|
(4.0
|
)
|
(18.7
|
)
|
|||
Other
|
(26.5
|
)
|
(5.1
|
)
|
|||
Cash
Used for
Investing
|
(716.4
|
)
|
(617.1
|
)
|
|||
Financing
Activities
|
|||||||
Cash
dividends
paid
|
(707.7
|
)
|
(659.6
|
)
|
|||
Net
increase (decrease) in
short-term debt
|
361.3
|
(147.6
|
)
|
||||
Proceeds
from issuance of
long-term debt
|
2,117.4
|
52.8
|
|||||
Repayments
of long-term
debt
|
(337.5
|
)
|
(95.9
|
)
|
|||
Proceeds
from exercise of stock
options
|
284.9
|
220.0
|
|||||
Acquisitions
of common stock for
the treasury
|
(2,543.7
|
)
|
(479.4
|
)
|
|||
Other
|
(29.4
|
)
|
(3.5
|
)
|
|||
Cash
Used for
Financing
|
(854.7
|
)
|
(1,113.2
|
)
|
|||
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
6.3
|
(1.0
|
)
|
||||
Increase
in Cash and Cash Equivalents
|
178.8
|
35.2
|
|||||
Cash
and Cash Equivalents, beginning of year
|
360.8
|
364.0
|
|||||
Cash
and Cash Equivalents, end of period
|
$
|
539.6
|
$
|
399.2
|
Jurisdiction
|
Years
|
United
States
|
2004
to 2006
|
United
Kingdom
|
1999
to 2006
|
Canada
|
2003
to 2006
|
Korea
|
2004
to 2006
|
Australia
|
2002
to 2006
|
Three
Months
|
Nine
Months
|
|||||||||||
Ended
September 30
|
Ended
September 30
|
|||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
||||||||
Noncash
charges
|
$
|
9.0
|
$
|
45.0
|
$
|
53.6
|
$
|
228.4
|
||||
Charges
(credits) for workforce reductions
|
4.6
|
61.4
|
(1.4
|
)
|
156.4
|
|||||||
Other
cash charges
|
6.9
|
14.3
|
22.2
|
32.4
|
||||||||
Charges
for special pension and other benefits
|
2.3
|
2.9
|
6.8
|
4.4
|
||||||||
Total
pretax charges
|
$
|
22.8
|
$
|
123.6
|
$
|
81.2
|
$
|
421.6
|
Three
Months
|
Nine
Months
|
|||||||||||
Ended
September 30
|
Ended
September 30
|
|||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
||||||||
Incremental
depreciation and amortization
|
$
|
11.8
|
$
|
35.1
|
$
|
61.5
|
$
|
169.5
|
||||
Asset
impairments
|
-
|
3.4
|
-
|
3.4
|
||||||||
Asset
write-offs
|
1.4
|
9.4
|
6.1
|
47.1
|
||||||||
(Gain)
loss on asset dispositions
|
(4.2
|
)
|
(2.9
|
)
|
(14.0
|
)
|
8.4
|
|||||
Noncash
charges
|
$
|
9.0
|
$
|
45.0
|
$
|
53.6
|
$
|
228.4
|
(Millions
of dollars)
|
2007
|
2006
|
|||||
Accrued
expenses – beginning of the year
|
$
|
111.2
|
$
|
28.2
|
|||
(Credits)
charges for workforce reductions
|
(1.4
|
)
|
156.4
|
||||
Other
cash charges
|
22.2
|
32.4
|
|||||
Cash
payments
|
(85.3
|
)
|
(120.3
|
)
|
|||
Currency
|
1.9
|
(.3
|
)
|
||||
Accrued
expenses at September 30
|
$
|
48.6
|
$
|
96.4
|
Three Months
|
Nine Months
|
||||||||||||
Ended September 30
|
Ended September
30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Cost
of products sold
|
$
|
18.9
|
$
|
80.2
|
$
|
71.4
|
$
|
302.3
|
|||||
Marketing,
research and general expenses
|
7.8
|
46.7
|
23.0
|
111.7
|
|||||||||
Other
(income) and expense, net
|
(3.9
|
)
|
(3.3
|
)
|
(13.2
|
)
|
7.6
|
||||||
Pretax
charges
|
22.8
|
123.6
|
81.2
|
421.6
|
|||||||||
Provision
for income taxes
|
(2.5
|
)
|
(32.4
|
)
|
(36.0
|
)
|
(115.1
|
)
|
|||||
Minority
owners’ share of subsidiaries’ net income
|
-
|
(.2
|
)
|
(.1
|
)
|
(1.6
|
)
|
||||||
Total
charges
|
$
|
20.3
|
$
|
91.0
|
$
|
45.1
|
$
|
304.9
|
2007
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation
|
$
|
8.4
|
$
|
3.4
|
$
|
-
|
$
|
11.8
|
||||||
Asset
write-offs
|
1.3
|
-
|
.1
|
1.4
|
||||||||||
Charges
for workforce reductions and special
|
||||||||||||||
pension
and other
benefits
|
1.9
|
3.8
|
1.2
|
6.9
|
||||||||||
Loss (gain) on asset disposals and other charges
|
5.4
|
(2.6
|
)
|
(.1
|
)
|
2.7
|
||||||||
Total
charges
|
$
|
17.0
|
$
|
4.6
|
$
|
1.2
|
$
|
22.8
|
2006
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation and amortization
|
$
|
23.5
|
$
|
8.1
|
$
|
3.5
|
$
|
35.1
|
||||||
Asset
impairments
|
-
|
3.4
|
-
|
3.4
|
||||||||||
Asset
write-offs
|
.5
|
7.4
|
1.5
|
9.4
|
||||||||||
Charges
for workforce reductions and
|
||||||||||||||
special
pension and other
benefits
|
13.4
|
48.0
|
2.9
|
64.3
|
||||||||||
Loss
on asset disposals and other charges
|
5.0
|
4.9
|
1.5
|
11.4
|
||||||||||
Total
charges
|
$
|
42.4
|
$
|
71.8
|
$
|
9.4
|
$
|
123.6
|
2007
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation
|
$
|
37.8
|
$
|
23.1
|
$
|
.6
|
$
|
61.5
|
||||||
Asset
write-offs
|
4.3
|
1.2
|
.6
|
6.1
|
||||||||||
Charges
(credits) for workforce reductions and
|
||||||||||||||
special
pension and other
benefits
|
13.5
|
(13.2
|
)
|
5.1
|
5.4
|
|||||||||
Loss (gain) on asset disposals and other charges
|
13.3
|
(4.8
|
)
|
(.3
|
)
|
8.2
|
||||||||
Total
charges
|
$
|
68.9
|
$
|
6.3
|
$
|
6.0
|
$
|
81.2
|
2006
|
||||||||||||||
(Millions
of dollars)
|
North
America
|
Europe
|
Other
|
Total
|
||||||||||
Incremental
depreciation and amortization
|
$
|
101.1
|
$
|
46.5
|
$
|
21.9
|
$
|
169.5
|
||||||
Asset
impairments
|
-
|
3.4
|
-
|
3.4
|
||||||||||
Asset
write-offs
|
24.0
|
21.4
|
1.7
|
47.1
|
||||||||||
Charges
for workforce reductions and
|
||||||||||||||
special
pension and other
benefits
|
38.8
|
113.4
|
8.6
|
160.8
|
||||||||||
Loss
on asset disposals and other charges
|
23.0
|
16.1
|
1.7
|
40.8
|
||||||||||
Total
charges
|
$
|
186.9
|
$
|
200.8
|
$
|
33.9
|
$
|
421.6
|
September 30,
|
December 31,
|
||||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||||
At lower of cost on the First-In, First-Out (FIFO) method or market:
|
|||||||||
Raw
materials
|
$
|
434.2
|
$
|
398.3
|
|||||
Work
in process
|
359.9
|
298.6
|
|||||||
Finished
goods
|
1,545.9
|
1,263.4
|
|||||||
Supplies
and other
|
265.7
|
242.6
|
|||||||
2,605.7
|
2,202.9
|
||||||||
Excess
of FIFO cost over Last-In, First-Out (LIFO) cost
|
(219.4
|
)
|
(198.4
|
)
|
|||||
Total
|
$
|
2,386.3
|
$
|
2,004.5
|
Three
Months Ended September 30
|
|||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||||||||
Nonoperating
expense
|
$
|
(6.5
|
)
|
$
|
(17.2
|
)
|
|||||||
Tax
credits
|
$
|
6.1
|
$
|
15.5
|
|||||||||
Tax
benefit of nonoperating expense
|
1.6
|
7.7
|
6.2
|
21.7
|
|||||||||
Net
synthetic fuel benefit
|
$
|
1.2
|
$
|
4.5
|
|||||||||
Per
share basis – diluted
|
$
|
-
|
$
|
.01
|
Nine
Months Ended September 30
|
|||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||||||||
Nonoperating
expense
|
$
|
(81.6
|
)
|
$
|
(40.6
|
)
|
|||||||
Tax
credits
|
$
|
75.6
|
$
|
35.9
|
|||||||||
Tax
benefit of nonoperating expense
|
26.3
|
101.9
|
14.5
|
50.4
|
|||||||||
Net
synthetic fuel benefit
|
$
|
20.3
|
$
|
9.8
|
|||||||||
Per
share basis – diluted
|
$
|
.04
|
$
|
.02
|
Defined
|
Other Postretirement
|
|||||||||||
Benefit Plans
|
Benefit Plans
|
|||||||||||
Three Months Ended September
30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
||||||||
Service
cost
|
$
|
20.9
|
$
|
22.1
|
$
|
3.4
|
$
|
3.7
|
||||
Interest
cost
|
78.9
|
74.9
|
13.0
|
11.8
|
||||||||
Expected
return on plan assets
|
(93.5
|
)
|
(84.7
|
)
|
-
|
-
|
||||||
Recognized
net actuarial loss
|
19.2
|
25.0
|
1.3
|
1.0
|
||||||||
Other
|
4.2
|
3.7
|
.7
|
.8
|
||||||||
Net
periodic benefit cost
|
$
|
29.7
|
$
|
41.0
|
$
|
18.4
|
$
|
17.3
|
Defined
|
Other Postretirement
|
|||||||||||
Benefit Plans
|
Benefit Plans
|
|||||||||||
Nine Months Ended September 30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
||||||||
Service
cost
|
$
|
62.5
|
$
|
65.8
|
$
|
10.0
|
$
|
11.2
|
||||
Interest
cost
|
235.5
|
223.1
|
38.0
|
35.3
|
||||||||
Expected
return on plan assets
|
(278.4
|
)
|
(252.5
|
)
|
-
|
-
|
||||||
Recognized
net actuarial loss
|
57.1
|
75.2
|
3.9
|
3.0
|
||||||||
Other
|
12.0
|
9.0
|
2.3
|
2.5
|
||||||||
Net
periodic benefit cost
|
$
|
88.7
|
$
|
120.6
|
$
|
54.2
|
$
|
52.0
|
(Millions
of dollars)
|
2007
|
2006
|
|||||||
Quarter
ended March 31
|
$
|
42
|
$
|
39
|
|||||
Quarter
ended June 30
|
17
|
10
|
|||||||
Quarter
ended September 30
|
21
|
9
|
|
Average Common Shares Outstanding
|
||||||||
Three Months
|
Nine Months
|
||||||||
Ended September 30
|
Ended September 30
|
||||||||
(Millions
of shares)
|
2007
|
2006
|
2007
|
2006
|
|||||
Basic
|
432.2
|
457.6
|
447.8
|
459.0
|
|||||
Dilutive
effect of stock options
|
2.3
|
.9
|
2.5
|
.8
|
|||||
Dilutive
effect of restricted share and restricted share unit
|
|||||||||
awards
|
1.3
|
1.3
|
1.3
|
1.1
|
|||||
Dilutive
effect of accelerated share repurchase
|
.2
|
-
|
.1
|
-
|
|||||
Diluted
|
436.0
|
459.8
|
451.7
|
460.9
|
Nine Months
|
|||||||
Ended September
30
|
|||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||
Net
income
|
$
|
1,366.9
|
$
|
1,016.9
|
|||
Unrealized
currency translation adjustments
|
418.4
|
222.5
|
|||||
Employee
postretirement benefits, net
|
49.5
|
-
|
|||||
Deferred
losses on cash flow hedges, net of tax
|
(3.8
|
)
|
(11.0
|
)
|
|||
Unrealized
holding gains on available-for-sale securities
|
-
|
.1
|
|||||
Comprehensive
income
|
$
|
1,831.0
|
$
|
1,228.5
|
·
|
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
|
Nine Months
|
||||||||||||
Ended September 30
|
Ended September
30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
NET
SALES:
|
|||||||||||||
Personal
Care
|
$
|
1,920.8
|
$
|
1,714.7
|
$
|
5,599.9
|
$
|
5,054.8
|
|||||
Consumer
Tissue
|
1,629.8
|
1,475.2
|
4,791.5
|
4,406.8
|
|||||||||
K-C
Professional & Other
|
780.5
|
717.5
|
2,240.9
|
2,074.3
|
|||||||||
Health
Care
|
292.1
|
308.2
|
891.5
|
926.5
|
|||||||||
Corporate
& Other
|
10.5
|
6.8
|
27.5
|
23.5
|
|||||||||
Intersegment
sales
|
(13.1
|
)
|
(12.0
|
)
|
(43.4
|
)
|
(46.2
|
)
|
|||||
Consolidated
|
$
|
4,620.6
|
$
|
4,210.4
|
$
|
13,507.9
|
$
|
12,439.7
|
Three Months
|
Nine Months
|
||||||||||||
Ended September 30
|
Ended September 30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
OPERATING PROFIT (reconciled to income before
|
|||||||||||||
income taxes):
|
|||||||||||||
Personal
Care
|
$
|
396.3
|
$
|
331.6
|
$
|
1,136.7
|
$
|
960.2
|
|||||
Consumer
Tissue
|
166.1
|
180.2
|
542.1
|
566.8
|
|||||||||
K-C
Professional & Other
|
125.1
|
127.2
|
353.7
|
345.6
|
|||||||||
Health
Care
|
43.4
|
51.4
|
151.0
|
161.0
|
|||||||||
Other
income and (expense), net
|
22.9
|
.1
|
19.6
|
(21.7
|
)
|
||||||||
Corporate
& Other
|
(71.1
|
)
|
(164.1
|
)
|
(255.6
|
)
|
(521.0
|
)
|
|||||
Total
Operating Profit
|
682.7
|
526.4
|
1,947.5
|
1,490.9
|
|||||||||
Nonoperating
expense
|
(6.5
|
)
|
(17.2
|
)
|
(81.6
|
)
|
(40.6
|
)
|
|||||
Interest
income
|
9.3
|
6.8
|
23.3
|
19.8
|
|||||||||
Interest
expense
|
(78.6
|
)
|
(56.5
|
)
|
(181.4
|
)
|
(165.9
|
)
|
|||||
Income
Before Income Taxes
|
$
|
606.9
|
$
|
459.5
|
$
|
1,707.8
|
$
|
1,304.2
|
Three Months
|
Nine Months
|
||||||||||||
Ended September 30
|
Ended September
30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Other
income and (expense), net
|
$
|
3.9
|
$
|
3.3
|
$
|
13.2
|
$
|
(7.6
|
)
|
||||
Corporate &
Other
|
(26.7
|
)
|
(126.9
|
)
|
(94.4
|
)
|
(414.0
|
)
|
Three Months
|
Nine Months
|
||||||||||||
Ended September 30
|
Ended September
30
|
||||||||||||
(Millions
of dollars)
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Personal
Care
|
$
|
16.1
|
$
|
48.5
|
$
|
66.3
|
$
|
220.4
|
|||||
Consumer
Tissue
|
5.5
|
52.0
|
8.5
|
131.8
|
|||||||||
K-C
Professional & Other
|
1.7
|
12.2
|
8.3
|
22.9
|
|||||||||
Health
Care
|
3.4
|
14.2
|
11.3
|
38.9
|
|||||||||
Total
|
$
|
26.7
|
$
|
126.9
|
$
|
94.4
|
$
|
414.0
|
·
|
Overview
of Third Quarter 2007 Results
|
·
|
Business
Segments
|
·
|
Results
of Operations and Related
Information
|
·
|
Liquidity
and Capital Resources
|
·
|
New
Accounting Standards
|
·
|
Environmental
Matters
|
·
|
Business
Outlook
|
·
|
Net
sales increased 9.7 percent compared with last
year.
|
·
|
Operating
profit and net income increased by 29.7 percent and 24.4 percent,
respectively, compared with last
year.
|
·
|
Cash
provided by operations was $567.6
million.
|
Net
Sales
|
2007
|
2006
|
||||
Personal
Care
|
$
|
1,920.8
|
$
|
1,714.7
|
||
Consumer
Tissue
|
1,629.8
|
1,475.2
|
||||
K-C
Professional & Other
|
780.5
|
717.5
|
||||
Health
Care
|
292.1
|
308.2
|
||||
Corporate
& Other
|
10.5
|
6.8
|
||||
Intersegment
sales
|
(13.1
|
)
|
(12.0
|
)
|
||
Consolidated
|
$
|
4,620.6
|
$
|
4,210.4
|
Percent Change in Net Sales Versus Prior Year
|
|||||||||||||||
Changes Due To
|
|||||||||||||||
Total
|
Volume
|
Net
|
|||||||||||||
Change
|
Growth
|
Price
|
Currency
|
Other
|
|||||||||||
Consolidated
|
9.7
|
5
|
1
|
3
|
1
|
||||||||||
Personal
Care
|
12.0
|
8
|
-
|
3
|
1
|
||||||||||
Consumer
Tissue
|
10.5
|
4
|
3
|
3
|
-
|
||||||||||
K-C
Professional & Other
|
8.8
|
4
|
1
|
3
|
1
|
||||||||||
Health
Care
|
(5.2
|
)
|
(9
|
)
|
-
|
1
|
3
|
·
|
Net
sales of personal care products advanced 12.0 percent in the third
quarter, highlighted by sales volume growth of approximately
8 percent. Product mix improved 1 percent, while currency
effects added more than 3 percent to sales.
|
·
|
Net
sales of consumer tissue products increased 10.5 percent versus the
third
quarter of 2006, benefiting from higher sales volumes, up 4 percent,
along
with improved net selling prices and foreign currency effects, each
approximately 3 percent better than the prior
year.
|
·
|
Net
sales of K-C Professional & Other products improved 8.8 percent
compared with the year-ago quarter. Sales volumes increased
more than 4 percent, net selling prices and product mix were both
about
1 percent better and currency effects added 3 percent to
sales. The higher volumes reflect mid-single digit gains in
North America, led by the Kleenex, Scott and Cottonelle washroom
brands
and Kimtech and WypAll wiper products, as well as continued double-digit
growth in Latin America.
|
·
|
Net
sales of health care products were down 5.2 percent in the third
quarter. Sales volumes were approximately
9 percent lower, partially offset by improved product
mix of about 3 percent and currency benefits of
1 percent. The decrease in sales volumes was primarily
attributable to the Corporation’s decision in the second half of last year
to exit the latex exam glove business, along with a higher level
of sales
of face masks in the year-ago quarter primarily due to avian flu
preparedness. In the exam glove category, the Corporation has
transitioned many customers and users from latex to its higher-margin,
clinically-preferred nitrile gloves. Sales growth of these
products, although strong, has not yet compensated for the drop-off
in
sales of latex gloves, due in part to supply constraints earlier
in the
year and competitive market conditions. As a result, overall
sales of exam gloves declined more than 20 percent in the third
quarter. In other areas of the business, third quarter sales of
medical devices, particularly Ballard respiratory catheters, generated
solid improvement.
|
Net
Sales
|
2007
|
2006
|
||||
North
America
|
$
|
2,590.1
|
$
|
2,429.2
|
||
Outside
North America
|
2,191.6
|
1,938.8
|
||||
Intergeographic
sales
|
(161.1
|
)
|
(157.6
|
)
|
||
Consolidated
|
$
|
4,620.6
|
$
|
4,210.4
|
·
|
Net
sales in North America increased 6.6 percent due to higher sales
volumes
for personal care, consumer tissue and K-C Professional & Other
products.
|
·
|
Net
sales outside North America increased 13.0 percent primarily due
to higher
personal care sales volumes, increased net selling prices for consumer
tissue and favorable currency effects in
Europe.
|
Operating
Profit
|
2007
|
2006
|
||||
Personal
Care
|
$
|
396.3
|
$
|
331.6
|
||
Consumer
Tissue
|
166.1
|
180.2
|
||||
K-C
Professional & Other
|
125.1
|
127.2
|
||||
Health
Care
|
43.4
|
51.4
|
||||
Other
income and (expense), net
|
22.9
|
.1
|
||||
Corporate
& Other
|
(71.1
|
)
|
(164.1
|
)
|
||
Consolidated
|
$
|
682.7
|
$
|
526.4
|
Three Months
|
|||||||
Ended September 30
|
|||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||
Other
income and (expense), net
|
$
|
3.9
|
$
|
3.3
|
|||
Corporate &
Other
|
(26.7
|
)
|
(126.9
|
)
|
Percentage Change in Operating Profit Versus Prior Year
|
|||||||||||||||||||||||||||
Changes Due To
|
|||||||||||||||||||||||||||
Raw
|
Energy and
|
||||||||||||||||||||||||||
Total
|
Net
|
Materials
|
Distribution
|
||||||||||||||||||||||||
Change
|
Volume
|
Price
|
Cost
|
Expense
|
Currency
|
Other
(a)
|
|||||||||||||||||||||
Consolidated
|
29.7
|
18
|
9
|
(14
|
)
|
(2
|
)
|
4
|
15
|
(b)
|
|||||||||||||||||
Personal
Care
|
19.5
|
15
|
-
|
(8
|
)
|
(1
|
)
|
3
|
11
|
||||||||||||||||||
Consumer
Tissue
|
(7.8
|
)
|
19
|
23
|
(14
|
)
|
(5
|
)
|
-
|
(31
|
)
|
||||||||||||||||
K-C
Professional &
Other
|
(1.7
|
)
|
8
|
5
|
(16
|
)
|
1
|
2
|
(2
|
)
|
|||||||||||||||||
Health
Care
|
(15.6
|
)
|
(1
|
)
|
-
|
(7
|
)
|
1
|
4
|
(13
|
)
|
·
|
Personal
care segment operating profit increased 19.5 percent as higher sales
volumes, favorable product mix and cost savings more than offset
higher
raw materials costs. In North America, higher sales volumes and
cost savings were tempered by cost inflation and higher marketing
and
general expenses related to organizational design changes. In
Europe, operating profit increased primarily due to cost
savings.
|
·
|
Consumer
tissue segment operating profit decreased 7.8 percent as increased
net
selling prices and higher sales volumes were more than offset by
cost
inflation, higher manufacturing costs and increased marketing and
general
expenses. In North America, operating profit declined because
higher sales volumes, increased net selling prices and cost savings
were
more than offset by raw materials cost inflation, primarily for pulp,
increased costs for product improvements, higher manufacturing costs
and
increased marketing expenses. Operating profit in Europe
increased due to cost savings, favorable currency effects and lower
distribution costs which combined exceeded the impact of raw materials
cost inflation. In the developing and emerging markets,
operating profit decreased as net selling price gains were more than
offset by higher manufacturing and distribution
costs.
|
·
|
Operating
profit for K-C Professional & Other products decreased 1.7 percent as
higher sales volumes and increased net selling prices were more than
offset by raw materials cost inflation, primarily waste paper costs,
and
increased distribution expenses.
|
·
|
Health
care segment operating profit decreased 15.6 percent as higher raw
materials cost inflation, primarily for nonwovens, unfavorable currency
effects related to the Thai baht, the lower sales volumes, increased
manufacturing costs and higher distribution and general expenses
more than
offset cost savings.
|
·
|
Other
income and (expense), net for 2007 includes a gain of $16.4 million
for
the settlement of litigation related to prior years’ operations in Latin
America, as well as, foreign currency transaction gains versus losses
in
2006.
|
Operating
Profit
|
2007
|
2006
|
||||
North
America
|
$
|
491.1
|
$
|
496.1
|
||
Outside
North America
|
239.8
|
194.3
|
||||
Other
income and (expense), net
|
22.9
|
.1
|
||||
Corporate
& Other
|
(71.1
|
)
|
(164.1
|
)
|
||
Consolidated
|
$
|
682.7
|
$
|
526.4
|
Three Months
|
|||||||
Ended September 30
|
|||||||
(Millions
of dollars)
|
2007
|
2006
|
|||||
Other
income and (expense), net
|
$
|
3.9
|
$
|
3.3
|
|||
Corporate &
Other
|
(26.7
|
)
|
(126.9
|
)
|
·
|
Operating
profit in North America decreased 1.0 percent as raw materials cost
inflation, primarily pulp cost, and product improvement costs exceeded
the
benefit of higher sales volumes.
|
·
|
Operating
profit outside North America increased 23.4 percent primarily due
to
higher earnings for personal care in the developing and emerging
markets.
|
·
|
Nonoperating
expense of $6.5 million for the third quarter of 2007 is the Corporation’s
pretax loss associated with its ownership interest in the synthetic
fuel
partnerships described in Note 5 to the Consolidated Financial
Statements.
|
·
|
Interest
expense increased 39.1 percent compared with 2006 principally due
to a
higher average level of debt. See Note 9 to the Consolidated
Financial Statements for additional detail on debt issued in the
third
quarter of 2007.
|
·
|
The
Corporation’s effective income tax rate was 27.6 percent in 2007 compared
with 24.9 percent in 2006 primarily due to lower synthetic fuel
credits.
|
·
|
The
Corporation’s share of net income of equity companies in the third quarter
was about $39 million compared with nearly $43 million in 2006,
primarily reflecting a decline in net income at Kimberly-Clark de
Mexico,
S.A.B. de C.V. due to the absence of earnings from pulp and paper
operations that were sold late last
year.
|
·
|
As
a result of the Corporation’s ongoing share repurchase program, including
the accelerated share repurchase program (“ASR”) announced in July 2007,
the average number of common shares outstanding declined, benefiting
third
quarter 2007 results by $.05 per share compared with last
year. This benefit was mostly offset by the higher interest
expense associated with the new debt issuances. See Note 9 to
the Consolidated Financial Statements for additional detail on the
ASR.
|
Net
Sales
|
2007
|
2006
|
||||
Personal
Care
|
$
|
5,599.9
|
$
|
5,054.8
|
||
Consumer
Tissue
|
4,791.5
|