Kimberly-Clark Reviews Global Business Plan Progress At Investor Meeting
New York -- March 26, 2007 -- Kimberly-Clark Corporation (NYSE: KMB) today said that it expects adjusted earnings in the first quarter of 2007 will be at or slightly above the high end of its previous guidance range, which called for earnings of $0.99 to $1.01 per share. The company also reaffirmed its plan to deliver top- and bottom-line growth in 2007 in line with the long-term objectives set forth under the company's Global Business Plan.
Adjusted earnings exclude anticipated charges for strategic cost reductions to streamline the company's operations and anticipated incremental implementation costs related to the transfer of certain administrative processes to third party providers. Further information about adjusted earnings is provided on pages 3-5.
The above announcements were made in connection with the company's Investor Day meeting, held here this morning. Thomas J. Falk, Chairman and CEO, and other members of Kimberly-Clark's senior leadership team met with investors and analysts to review progress on the company's Global Business Plan, introduced in 2003, and its strategies for creating sustainable growth. The executives detailed targeted initiatives for building market share and brand equity, bolstering innovation, improving speed to market and delivering ongoing cost savings across the company's global business portfolio.
"We're off to a very good start in 2007, building on the momentum we created throughout 2006," Mr. Falk said. "Our teams are continuing to execute well, bringing new and improved products to market and driving costs out of the system. We have plans in place to deliver solid top- and bottom-line improvement for the year as a whole."
The anticipated strong financial performance for the first quarter reflects broad-based revenue growth, highlighted by continued double-digit gains in developing and emerging markets and excellent sales volumes for the company's baby and child care brands in North America. Innovations such as Huggies Supreme Gentle Care and Natural Fit diapers, Pull-Ups training pants with Cool Alert and improved Huggies baby wipes helped boost the growth in North America.
"We are making significant progress under our Global Business Plan, having successfully delivered on our financial commitments each year since the plan was introduced. Moreover, we have become a leaner, stronger, more focused company and implemented substantial changes within each of our businesses to ensure Kimberly-Clark's long term success," Falk said. "Our category-defining brands, world-class capabilities and financial discipline will help us continue to drive sustainable growth, and we are confident that we have the right plan and team in place to deliver enhanced value for shareholders for many years to come."
Additional highlights from the meeting follow.
Accelerating Innovation
Regarding innovation, Falk outlined how the company is acting on customer, shopper and user insights to drive its innovation process. He also detailed Kimberly-Clark's continued efforts to increase its speed to market, reporting that product development cycle time has been cut in half since the launch of the Global Business Plan. Progress made in reducing cycle time has created efficiencies, enabling the company to devote a larger amount of spending to longer-term ideas without a commensurate increase in overall spending. Falk cited numerous examples of how the company's innovation pipeline is contributing to growth across all business segments and said R&D spending is forecast to increase in line with sales to fuel future growth.
Enhanced Commitment To Strategic Marketing
During his presentation, Chief Marketing Officer Tony Palmer reiterated the company's plan to boost future spending for strategic marketing, noting that advertising and promotion expense in 2007 is expected to increase at a faster rate than sales. This year's increase will put the company on track to reach its Global Business Plan target to raise spending levels as a percent of sales by more than 100 basis points from 2004 to 2009. The increased investment in strategic marketing will support the company's targeted growth initiatives and will help drive improvements in market share and brand equity. Palmer also outlined the company's plan to focus on improving marketing execution and capabilities by sharing best practices across the enterprise and better leveraging the advantages of Kimberly-Clark's global scale.
Continued Financial Discipline & Cost Savings Focus
Chief Financial Officer Mark Buthman reaffirmed Kimberly-Clark's commitment to delivering ongoing cost savings through its FORCE (Focused On Reducing Costs Everywhere) program. Buthman noted that savings from the program are expected to total $485 - $510 million for the three-year period from 2005 through 2007 compared with a target of $400 - $500 million established in December 2004. With this initial goal successfully met, Buthman outlined a new three-year target to deliver an additional $350 - $450 million of savings from 2008 through 2010. Buthman also reviewed the company's excellent progress in implementing its separate Strategic Cost Reduction Plan, noting that Kimberly-Clark is on track to deliver more savings than originally estimated while Plan charges are anticipated to be within the lower half of the initial range.
Buthman also reported that the financial discipline underpinning the company's Global Business Plan is delivering strong results, contributing to an increase in adjusted ROIC of 150 basis points since 2003. Over that same period, cash outlays for dividends and share repurchases totaled $6.3 billion, up nearly 60 percent versus the previous three years. Buthman indicated that Kimberly-Clark will continue to allocate capital in a disciplined manner, with a focus on increasing cash flow and deploying cash in shareholder-friendly ways, through healthy dividend increases and meaningful share repurchases.
Non-GAAP Financial Measure
This press release mentions forecasted adjusted earnings per share which has not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and is therefore referred to as a non GAAP financial measure. This non-GAAP financial measure excludes certain items that are included in the company's earnings per share calculated in accordance with GAAP. A detailed explanation of each of the adjustments is given below. In accordance with the requirements of Regulation G, a reconciliation of this non-GAAP financial measure to the comparable GAAP financial measure is attached.
Kimberly-Clark provides non-GAAP financial measures as supplemental information to our GAAP financial measures. Management and the company's Board of Directors use adjusted earnings per share, among other measures, to (a) evaluate the company's historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources and (c) measure the operational performance of the company's business units and their managers. Additionally, the Management Development and Compensation Committee of the company's Board of Directors uses this non-GAAP financial measure, among other measures, when setting and assessing achievement of incentive compensation goals. These goals are based, in part, on the company's adjusted earnings per share determined by excluding the charges that are used in calculating this non-GAAP financial measure.
In addition, Kimberly-Clark management believes that investors' understanding of the company's performance is enhanced by including non-GAAP financial measures as a reasonable basis for comparing the company's ongoing results of operations. We believe that many investors are interested in understanding the performance of our businesses by comparing our results from ongoing operations from one period to the next. By providing non-GAAP financial measures, together with the reconciliations, we believe we are enhancing investors' understanding of our businesses and our results of operations, as well as assisting investors in evaluating how well the company is executing the material changes to our enterprise contemplated by the strategic cost reduction plan. Also, many financial analysts who follow our company focus on and publish both historical results and future projections based on non GAAP financial measures. We believe that it is in the best interests of our investors for us to provide this information to analysts so that those analysts accurately report the non-GAAP financial information.
We calculate adjusted earnings per share by excluding from the comparable GAAP measure the following: (i) charges related to our strategic cost reduction plan for streamlining the company's operations; and (ii) certain incremental implementation costs relating to our strategic cost reduction plan. Each of these adjustments and the basis for such adjustments are described below:
- Strategic cost reduction plan. In July 2005, the company authorized a strategic cost reduction plan aimed at streamlining manufacturing and administrative operations, primarily in North America and Europe. The strategic cost reduction plan commenced in the third quarter of 2005 and is expected to be substantially completed by December 31, 2008. At the time we announced the plan, we advised investors that we would report our earnings per share and operating profit and margin excluding the strategic cost reduction plan charges so that investors could compare our operating results without the plan charges from period to period and could assess our progress in implementing the plan. Management does not consider these charges to be part of our earnings from ongoing operations for purposes of evaluating the performance of its business units and their managers and excludes these charges when making decisions to allocate resources among its business units.
- Implementation Costs. In connection with our strategic cost reduction plan, the company will incur incremental implementation costs related to the transfer of certain administrative processes to third party providers. These costs will be incurred primarily is the first six months of 2007. Management intends to exclude these implementation costs from our earnings from ongoing operations for purposes of evaluating the performance of our business units and their managers and to exclude these costs when making decisions to allocate resources among its business units.
This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for the comparable GAAP measures. There are limitations to non-GAAP financial measures because they are not prepared in accordance with GAAP and they may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items being excluded. The company compensates for these limitations by using non-GAAP financial measures as supplements to the GAAP measures and by providing the reconciliations of the non-GAAP and comparable GAAP financial measures. The non-GAAP financial measures should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.
About Kimberly-Clark
Kimberly-Clark and its well-known global brands are an indispensable part of life for people in more than 150 countries. Every day, 1.3 billion peoplenearly a quarter of the world's populationtrust K-C brands and the solutions they provide to enhance their health, hygiene and well-being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds the No. 1 or No. 2 share position in more than 80 countries. To keep up with the latest K-C news and to learn more about the company's 135-year history of innovation, visit www.kimberly-clark.com.
Certain matters contained in this news release concerning the business outlook, including new product introductions, cost savings and acquisitions, anticipated costs and benefits related to the Competitive Improvement Initiatives, anticipated financial and operating results, strategies, contingencies and anticipated transactions of the company constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company's results will be as estimated. For a description of certain factors that could cause the company's future results to differ materially from those expressed in any such forward-looking statements, see Item 1A of the company's Annual Report on Form 10-K for the year ended December 31, 2006 entitled "Risk Factors."
