01—Abstract
Summary
Summary of the 10-K filed March 21, 1997. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 1996 annual report (filed on Form 10-K) shows net sales of $13.15 billiona, down from $13.37 billion in 1995, while net income rose to $1.40 billion ($4.98 per share) from $33.2 million ($0.12 per share) in 1995.
The 1995 results included a one-time pretax charge of $1,440.0 millionb tied to the Scott Paper merger and restructuring. Operating profit reached $2.05 billion, with operating margin of 15.6% of net sales versus 1.6% in 1995. Cash provided by operations was $1.67 billion, and the ratio of total debt to capital fell to 32.9% from 41.9%.
The filing centers on a strategic shift away from pulp. The company agreed to sell its Coosa Pines, Alabama pulp and newsprint operations to Alliance Forest Products for approximately $600 millionc in cash, expected to close in late March 1997. It also plans to sell pulp operations at Terrace Bay, Ontario; New Glasgow, Nova Scotia; and Miranda, Spain by mid-1998, and to sell its 50.1% interest in Scott Paper Limited to Kruger, Inc. Management says internal pulp operations will fall from about 80% to below 30% of virgin fiber needs.
Management also announced a 2-for-1 stock split and a 4.3% quarterly dividend increase, both effective April 2, 1997, and set a goal of doubling earnings per share from operations between 1995 and 2000. Key risks include exposure to pulp price cycles after the divestitures, foreign market and currency risk across 35 countries, and pending litigation including asbestos, breast implant, and West Virginia tobacco-related claims, which management does not expect to be materially adverse. Cluster Rule environmental capital spending is estimated at $370 million to $400 milliond, falling to $305 million to $335 million if the Coosa Pines sale closes.
02—Key points
Key Highlights
- Net income was $1,403.8 million, or $4.98 per share, compared with $33.2 million, or $0.12 per share, in 1995, which included a $1,440.0 million pretax one-time charge.
- Net sales were $13,149.1 million, down 1.7% from $13,373.0 million, mainly due to divested businesses; excluding them, net sales rose 4.6% and sales volumes rose 6.0%.
- Operating profit was $2,053.7 million, a 15.6% return on sales, compared with $213.0 million (1.6%) in 1995.
- The Coosa Pines pulp and newsprint mill is being sold to Alliance Forest Products for about $600 million in cash, with further pulp mill sales planned by mid-1998.
- Management plans to reduce internal pulp supply from about 80% to below 30% of virgin fiber needs over the next 18 months.
- A 2-for-1 stock split and a 4.3% dividend increase take effect April 2, 1997.
- Total debt to capital fell to 32.9% from 41.9%, and pretax interest coverage improved to 11.2 times from 1.6 times.
03—Questions
Frequently Asked Questions
Why did net income jump so sharply in 1996?
The 1995 results included a $1,440.0 million pretax one-time charge for the Scott merger and restructuring, which cut 1995 net income to $33.2 million. In 1996 there was no comparable charge, and net income was $1,403.8 million. Operating profit also rose as a result of higher sales volumes, merger synergies, and lower pulp costs.
What is the company doing with its pulp operations?
Kimberly-Clark is exiting the cyclical, capital-intensive pulp business. It agreed to sell the Coosa Pines mill for about $600 million and plans to sell mills at Terrace Bay, New Glasgow, and Miranda by mid-1998. It will retain enough pulp and recycled fiber capacity in North America to support its away-from-home and value-segment tissue products and will buy market pulp for premium brands.
What are the main risks to future earnings?
The filing cites higher pulp prices after integration falls, which could hurt earnings if selling prices do not keep pace. Other risks include the success of planned divestitures and acquisitions, the cost-savings targets from the Scott merger, foreign currency and economic instability in developing markets, and Mexican peso exposure. Pending litigation includes asbestos, breast implant, and West Virginia tobacco-related suits, which management does not expect to have a material adverse effect.
What shareholder-related actions were announced?
Effective April 2, 1997, the quarterly dividend rises 4.3% and the common stock splits 2-for-1. Management also set a goal of doubling earnings per share from operations between 1995 and 2000 and of delivering total shareholder return consistently above the S&P 500 Index.
How strong is the balance sheet?
Total debt fell by more than $485 million during 1996, and the ratio of total debt to capital dropped to 32.9% from 41.9%. Stockholders' equity rose to $4,483.1 million from $3,650.4 million. The company's long-term debt carries a Double-A rating, and its commercial paper is rated in the top category.
04—Continue