01—Abstract
Summary
Summary of the 10-K filed March 26, 1998. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation's 10-K for fiscal 1997 describes a company in transition from diversified businesses to a global consumer products company built on core technologies, trademarks and consumer product franchises.
In 1997 it divested Coosa Pines pulp and newsprint operations for approximately $600 milliona, sold its interest in Scott Paper Limited for approximately $127 million, and acquired Tecnol Medical Products for an exchange of about 8.7 million shares. Consolidated net sales fell 4.6% to $12,546.6 million, while operating profit dropped 36.5% to $1,303.2 million after a $701.2 million pretax restructuring charge under the Announced Plan (18 facility sales, closures or downsizings and about 5,000 job cuts). Net income was $901.5 million, or $1.61 diluted EPS, versus $1,403.8 million and $2.48 in 1996.
Excluding the charge, the filing states EPS rose 3.0% to $2.44b from $2.37. The filing highlights weaker selling prices, particularly for tissue, plus transitional issues in North American away-from-home business and heightened European competition. Personal Care Products was the bright spot, with segment net sales up 8.2% and operating profit up 22.5%, while Tissue-Based Products sales fell 10.3% and operating profit fell 16.7%.
Management expects the Announced Plan to save about $100 millionc in 1998 and $200 million annually by 2000, and said first-quarter 1998 earnings from operations would be 54 to 58 cents per share. Balance sheet and liquidity remain sound. Cash provided by operations was $1,406.6 million, and the ratio of total debt to capital rose to 36.5% from 32.9%, against a stated target of 30 to 40%.
Long-term debt securities are rated Double-A, and the company repurchased 17.9 million shares for roughly $900 milliond during 1997. Litigation includes a Florida-led antitrust complaint and about 45 related class actions over away-from-home tissue pricing, which management does not expect to have a material adverse effect.
02—Key points
Key Highlights
- Net sales of $12,546.6 million, down 4.6% from $13,149.1 million in 1996
- Operating profit of $1,303.2 million, down 36.5%, after a $701.2 million 1997 Charge tied to the Announced Plan
- Diluted EPS of $1.61 on net income of $901.5 million; excluding the 1997 Charge, EPS rose 3.0% to $2.44
- Personal Care Products net sales rose 8.2% to $5,234.8 million and operating profit rose 22.5% to $969.1 million
- Tissue-Based Products net sales fell 10.3% to $6,611.5 million and operating profit fell 16.7%
- Divested Coosa Pines for about $600 million and Scott Paper Limited for about $127 million; acquired Tecnol Medical Products via about 8.7 million shares
- Announced Plan expected to save $100 million in 1998 and $200 million annually by 2000; total debt to capital rose to 36.5%
03—Questions
Frequently Asked Questions
Why did operating profit fall so sharply in 1997?
The main driver was the $701.2 million pretax 1997 Charge for the Announced Plan, which covers the sale, closure or downsizing of 18 manufacturing facilities and about 5,000 job cuts. Operating profit also reflected lower selling prices worldwide, particularly for tissue products, transitional issues in the North American away-from-home business, and heightened competition in Europe. Selling prices alone were approximately $240 million lower than in 1996.
What is the Announced Plan expected to deliver?
The filing says management expects the plan to save $100 million in 1998, growing to $200 million annually in the year 2000. The total pretax cost is approximately $810.0 million, of which $701.2 million was recorded in 1997 and $108.8 million will be recorded in 1998.
How is the company's financial position and liquidity?
Cash provided by operations was $1,406.6 million in 1997, and total stockholders' equity was $4,125.3 million. Debt rose to $2.5 billion at year end from $2.3 billion, and the ratio of total debt to capital increased to 36.5% from 32.9%, within the company's 30 to 40% target. Long-term debt securities carry a Double-A rating, and $1.0 billion of revolving credit facilities were in place.
What are the main legal and environmental risks?
The company faces a complaint filed by the State of Florida on May 13, 1997, alleging that away-from-home tissue manufacturers fixed prices, along with about 45 related class actions seeking unspecified actual and treble damages. Management says these actions are not expected to have a material adverse effect. Environmentally, the company has been named a potentially responsible party at several waste sites, and expects 1998 U.S. environmental capital spending of $102.6 million.
What is the outlook for 1998?
The filing says first-quarter 1998 earnings from operations are expected to be in the range of 54 to 58 cents per share, and that earnings from operations in the last nine months of 1998 should exceed the same period of 1997 as Announced Plan savings and recent U.S. tissue price increases take effect. Management also expects good growth and solid returns in North America and Latin America, while Europe remains uncertain.
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