01—Abstract
Summary
Summary of the 10-K filed March 26, 1996. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 10-K for fiscal year ended December 31, 1995 reports that the December 12, 1995 merger with Scott Paper Company, accounted for as a pooling of interests, was the defining event of the year.
Net sales rose to $13,788.6 milliona from $11,979.2 million in 1994, but operating profit fell to $213.0 million from $1,277.1 million after a $1,440.0 million pretax restructuring and other unusual charge recorded in the fourth quarter. Net income was $33.2 million, or $.12 per share, compared with $753.8 million, or $2.71 per share, in 1994. Excluding the one-time charge, the filing states operating profit improved 29.4 percent in absolute terms, and the company's 1995 net income return on average stockholders' equity excluding the charge was 28.4 percent.
The company's three segments are Personal Care Products (net sales of $4,342.1 millionb), Tissue-Based Products ($7,982.0 million) and Newsprint, Paper and Other ($1,584.3 million). The integration plan is expected to yield annual pretax benefits of approximately $250 million in 1996, $400 million in 1997 and $500 million in 1998, and involves selling up to 12 mills and eliminating about 6,000 jobs. Management states that the merger will be additive to earnings per share in 1996 and that the securities analysts' consensus estimate of $4.94 per share is realistic.
The balance sheet shows total assets of $11,439.2 millionc, long-term debt of $1,984.7 million and stockholders' equity of $3,650.4 million at year-end. Cash provided by operations was $931.6 million and capital spending was $817.6 million.
The ratio of total debt to capital was 41.9 percent, outside the company's target range of 28 to 32 percent, which management attributes primarily to the one-time charge. The filing also describes ongoing asbestos and breast implant litigation that management believes will not have a material adverse effect.
02—Key points
Key Highlights
- Net sales increased 15.1 percent to $13,788.6 million, driven by higher selling prices, sales volumes and improved product mix.
- Operating profit fell to $213.0 million from $1,277.1 million, reflecting the $1,440.0 million pretax restructuring and other unusual charge tied to the Scott merger.
- Net income was $33.2 million, or $.12 per share, versus $753.8 million, or $2.71 per share, in 1994; the one-time charge reduced 1995 net income by $1,070.9 million, or $3.83 per share.
- Excluding the one-time charge, operating profit improved 29.4 percent in absolute terms.
- Management expects the merger to be additive to 1996 earnings per share and states the $4.94 analyst consensus estimate is realistic.
- The integration plan targets annual pretax benefits of about $250 million in 1996, $400 million in 1997 and $500 million in 1998, including sale of up to 12 mills and about 6,000 job reductions.
- Total debt to capital was 41.9 percent, outside the 28 to 32 percent target range, and the company's long-term debt securities carry a Double-A rating.
03—Questions
Frequently Asked Questions
What drove the drop in 1995 earnings?
The drop was driven by a $1,440.0 million pretax restructuring and other unusual charge recorded in the fourth quarter for the Scott merger, restructuring of combined operations and other unusual items. The charge reduced 1995 net income by $1,070.9 million, or $3.83 per share. Excluding it, operating profit improved 29.4 percent in absolute terms.
How is the Scott Paper merger accounted for and how did it affect the reported figures?
The $9.4 billion merger, completed December 12, 1995, was accounted for as a pooling of interests, so the consolidated financial statements were restated for all periods to include Scott's results. Kimberly-Clark issued .78 of a share of its common stock for each Scott share.
What does management expect for 1996?
Management said 1996 should be an excellent year, though difficult to forecast. It states the merger will be additive to earnings per share in 1996 and that the securities analysts' consensus estimate of $4.94 per share is realistic. The company forecasts an effective tax rate of approximately 36 percent.
Which business segments generate the most sales?
Tissue-Based Products led with net sales of $7,982.0 million in 1995, followed by Personal Care Products at $4,342.1 million and Newsprint, Paper and Other at $1,584.3 million. Within Personal Care, the filing lists brands including Huggies, Kotex and Depend; Tissue-Based products include Kleenex, Scott and Cottonelle.
How is the company's balance sheet and debt position?
At December 31, 1995, total assets were $11,439.2 million, long-term debt was $1,984.7 million and stockholders' equity was $3,650.4 million. The ratio of total debt to capital was 41.9 percent, above the company's 28 to 32 percent target range, which management attributes primarily to the one-time charge. Revolving credit facilities totaled $1,575 million and were unused at year-end.
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