01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Kimberly-Clark Corporation reported 2008 net sales of $19.42 billiona, up from $18.27 billion in 2007, but net income fell to $1.69 billion from $1.82 billion and diluted earnings per share declined to $4.04 from $4.09.
The filing attributes the margin pressure to significant raw material cost inflation: inflation in key cost components totaled more than $725 millionb, which more than offset higher net selling prices, volume gains and about $171 million in cost savings. Operating profit fell 2.6% to $2.55 billion, and operating margin declined to 13.1% from 14.3%. Segment results were mixed, with Personal Care operating profit rising 5.6% while Consumer Tissue fell 14.4%, K-C Professional & Other fell 10.5% and Health Care fell 26.7%.
Balance sheet and capital allocation shifted notably in 2008. Total assets declined to $18.09 billion and stockholders' equity fell to $3.88 billionc from $5.22 billion, largely reflecting a $900 million unrealized translation loss and a $687 million employee postretirement benefit charge within accumulated other comprehensive loss. Long-term debt rose to $4.88 billion, and total debt and redeemable preferred securities reached $7.0 billion.
The company repurchased $625 milliond of stock in 2008 but does not expect to repurchase shares in 2009, citing an expected $530 million pension contribution. Pension expense is estimated at about $295 million for 2009, compared with $97 million in 2008. The company expects 2009 results to be negatively affected by weaker foreign currencies and higher pension expense, partly offset by anticipated moderation in commodity costs.
It intends to accelerate cost reductions and focus on cash flow. The strategic cost reduction plan was completed in 2008, with cumulative pretax charges of $880 million and expected annual savings of $385 million.
02—Key points
Key Highlights
- Net sales rose 6.3% to $19.42 billion in 2008, driven by higher net selling prices and sales volumes plus favorable currency effects.
- Net income declined 7.3% to $1.69 billion, and diluted EPS fell 1.2% to $4.04, as more than $725 million of input cost inflation outweighed about $171 million in cost savings.
- Operating margin fell to 13.1% from 14.3%, with Consumer Tissue operating profit down 14.4% and Health Care down 26.7%, while Personal Care grew 5.6%.
- Stockholders' equity dropped to $3.88 billion from $5.22 billion, driven by a $900 million unrealized translation loss and a $687 million postretirement benefit adjustment.
- Total debt and redeemable preferred securities rose to $7.0 billion from $6.5 billion, largely from consolidating the monetization financing entities; S&P lowered the long-term rating from A+ to A in August 2008.
- The company repurchased $625 million of its stock in 2008 but does not expect to repurchase shares in 2009 because of an estimated $530 million pension contribution.
- The strategic cost reduction plan was completed in 2008 with cumulative pretax charges of $880 million, and total annual savings are now expected to reach $385 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Kimberly-Clark kept $0.09.
- Revenue$19.41B100.0%
- Cost of revenue−$13.56B69.8%
- Gross profit$5.86B30.2%
- Operating costs−$3.31B17.1%
- Operating income$2.55B13.1%
- Interest, other & tax−$857.0M4.4%
- Net income$1.69B8.7%
Where FY2008 revenue went
$19.41B- Cost of revenue: $13.56B, 70% of revenue
- Other operating costs: $3.01B, 16% of revenue
- Net income: $1.69B, 8.7% of revenue
- R&D: $297.0M, 1.5% of revenue
- Interest, other & tax: $857.0M, 4.4% of revenue
Kept 8.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $19.41B$18.27B | +6.3% |
| Cost of Revenue | $13.56B$12.56B | +7.9% |
| Gross Profit | $5.86B$5.70B | +2.7% |
| R&D Expenses | $297.00M— | — |
| Operating Income | $2.55B$2.62B | −2.6% |
| Interest Expense | $304.00M$265.00M | +14.7% |
| Net Income | $1.69B$1.82B | −7.3% |
| EPS (Basic) | $4.04$4.11 | −1.7% |
| EPS (Diluted) | $4.03$4.08 | −1.2% |
| Shares Outstanding (Basic) | 418.50M— | — |
| Shares Outstanding (Diluted) | 419.60M— | — |
05—Questions
Frequently Asked Questions
How did Kimberly-Clark perform financially in 2008?
Net sales grew 6.3% to $19.42 billion, but operating profit declined 2.6% to $2.55 billion and net income decreased 7.3% to $1.69 billion. Diluted EPS was $4.04 versus $4.09 in 2007. Raw material inflation of more than $725 million was the main reason profits did not keep pace with sales.
What is the outlook for 2009?
The company says the unfavorable global economy continues to weigh on results and makes near-term predictions more difficult. It expects weaker foreign currencies and higher pension expense, which is estimated at about $295 million in 2009 versus $97 million in 2008, to reduce results. It plans to offset these with other business improvements, accelerate cost reductions and focus on cash flow.
Why did the balance sheet weaken in 2008?
Stockholders' equity fell to $3.88 billion from $5.22 billion. The filing attributes this mainly to a $900 million unrealized translation loss and a $687 million net charge for employee postretirement benefits recorded in accumulated other comprehensive loss, along with $625 million of share repurchases. Long-term debt increased to $4.88 billion.
What changed with the company's debt and financing?
Total debt and redeemable preferred securities reached $7.0 billion at year-end 2008, up from $6.5 billion, mainly because the company began consolidating the monetization financing entities on June 30, 2008. S&P lowered the long-term credit rating from A+ to A in August 2008, and Moody's affirmed its A2 rating. The company issued $500 million of 7.5% notes due 2018 in November 2008.
How did the business segments perform?
Personal Care was the strongest segment, with net sales up 9.4% and operating profit up 5.6%. Consumer Tissue operating profit fell 14.4% on higher costs and lower volumes, K-C Professional & Other fell 10.5%, and Health Care fell 26.7% after lower prices and higher manufacturing costs.
06—Continue