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Kimberly-Clark Announces Third Quarter 2015 Results

DALLAS, Oct. 21, 2015 /PRNewswire/ -- Kimberly-Clark Corporation (NYSE: KMB) today reported third quarter 2015 results and updated its previous guidance for full-year 2015 organic sales growth and adjusted earnings per share.

Executive Summary

  • Third quarter 2015 net sales of $4.7 billion decreased 7 percent compared to the year-ago period, as changes in foreign currency exchange rates reduced sales 12 percent. Organic sales rose 5 percent, including a 10 percent increase in developing and emerging markets and a 7 percent improvement in personal care in North America.
  • Diluted net income per share for the third quarter was $1.41 in 2015 and $1.50 in 2014.
  • Third quarter adjusted earnings per share were $1.51 in 2015 compared to adjusted earnings per share from continuing operations of $1.50 in the prior year. Performance benefited from organic sales growth, cost savings, input cost deflation and a lower share count. Comparisons were negatively impacted by unfavorable foreign currency exchange rate effects, increased marketing, research and general spending on a local currency basis and higher other expense. Adjusted earnings per share in both years exclude certain items described later in this news release.
  • Full-year 2015 organic sales growth is expected to be 4 to 5 percent compared to the company's prior expectation of 3 to 5 percent. Full-year 2015 adjusted earnings per share are anticipated to be $5.70 to $5.80 versus the company's previous guidance of $5.65 to $5.80.

Chairman and Chief Executive Officer Thomas J. Falk said, "We delivered another quarter of good financial results. Organic sales grew mid-single digits, with benefits from targeted growth initiatives, innovations and brand investments. We achieved significant cost savings and improved adjusted gross margin. In addition, our adjusted earnings per share from continuing operations set a new quarterly record and we allocated capital in shareholder-friendly ways. We are executing well in a challenging environment and are raising the low end of our previous guidance ranges for full-year organic sales growth and adjusted earnings per share."

Third Quarter 2015 Operating Results

Sales of $4.7 billion in the third quarter of 2015 were down 7 percent compared to the year-ago period. Changes in foreign currency exchange rates reduced sales 12 percent as a result of the weakening of most currencies relative to the U.S. dollar. Organic sales rose more than 5 percent, as volumes increased approximately 5 percent and product mix/other was slightly favorable.

Third quarter operating profit was $779 million in 2015 and $877 million in 2014. Adjusted operating profit was $826 million in the third quarter of 2015 compared to $878 million in the year-ago period. Adjusted results in 2015 exclude $19 million of charges for pension settlements, $17 million of charges for restructuring the company's business in Turkey and $11 million of 2014 Organization Restructuring costs. Adjusted results in 2014 exclude $1 million of restructuring costs for European strategic changes.

The year-over-year adjusted operating profit comparison benefited from organic sales growth, $85 million in cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program and $20 million of savings from the 2014 Organization Restructuring. Input costs decreased $45 million overall due to lower costs for raw materials other than fiber. Translation effects due to changes in foreign currency exchange rates lowered operating profit by $115 million and transaction effects also negatively impacted the comparison. Total marketing, research and general expenses increased on a local currency basis, mostly due to higher administrative costs. On an adjusted basis, other (income) and expense, net was expense of $16 million in 2015 and income of $16 million in 2014. Results in 2015 were driven by foreign currency transaction losses, while prior-period results benefited from a gain on the sale of certain non-core assets.

The third quarter adjusted effective tax rate, which excludes the effects of the previously mentioned items excluded from adjusted earnings per share, was 30.3 percent in 2015 and 31.8 percent in 2014. The company expects that the full-year 2015 adjusted effective tax rate will be in the lower half of its 31.5 to 33.5 percent target range.

Kimberly-Clark's share of net income of equity companies in the third quarter was $37 million in 2015 and $31 million in 2014. At Kimberly-Clark de Mexico, results benefited from organic sales growth, lower input costs and cost savings, but were negatively impacted by a weaker Mexican peso. Third quarter net income attributable to noncontrolling interests was $12 million in 2015 and $20 million in 2014. The change was driven by the redemption of $0.5 billion of preferred securities in December 2014.

Cash Flow and Balance Sheet

Cash provided by operations in the third quarter of 2015 was $849 million compared to $976 million in 2014. The comparison was affected by lower cash earnings and a smaller improvement in working capital than in the prior year. Capital spending for the third quarter was $271 million in 2015 and $291 million in 2014. Full-year spending is expected to be toward the high end of the company's target range of $950 to $1,050 million.

Third quarter 2015 share repurchases were 1.4 million shares at a cost of $150 million. The company expects full-year share repurchases of $800 million, in line with the previous target of $700 to $900 million. Total debt was $7.6 billion at September 30, 2015 and $7.0 billion at the end of 2014.

Third Quarter 2015 Business Segment Results

Personal Care Segment

Third quarter sales of $2.4 billion decreased 5 percent. Currency rates were unfavorable by 13 percent. Volumes increased more than 7 percent and product mix was favorable by 1 percent. Third quarter operating profit of $484 million was essentially even with the year-ago period. The comparison benefited from organic sales growth, cost savings and lower input costs, offset by unfavorable currency effects and increased marketing, research and general spending on a local currency basis.

Sales in North America increased 5 percent. Currency was unfavorable 2 percent. Volumes rose 10 percent, while net selling prices fell 3 percent, driven by increased promotion activity. Huggies diaper volumes rose low double-digits compared to a low double-digit decline last year and included benefits from innovation and increased promotion support. Adult care volumes were up double-digits, including strong growth on Poise and Depend absorbent products and introductory shipments of new Poise Impressa bladder supports. Huggies baby wipes volumes rose high-single digits, with benefits from innovation, and child care volumes were up mid-single digits.

Sales in developing and emerging markets decreased 11 percent, including a 25 percent negative impact from changes in currency rates. Volumes increased 8 percent, net selling prices improved 4 percent and product mix advanced 1 percent. The volume growth included gains in China, Eastern Europe and most of Latin America, led by Argentina, Brazil and Colombia. The higher net selling prices were driven by increases in Eastern Europe and Latin America in response to weaker currency rates.

Sales in developed markets outside North America (Australia, South Korea and Western/Central Europe) decreased 15 percent, driven by unfavorable currency rates.

Consumer Tissue Segment

Third quarter sales of $1.5 billion decreased 10 percent. Currency rates were unfavorable by 11 percent. Volumes increased 2 percent, while net selling prices were down 1 percent. Third quarter operating profit of $260 million decreased 9 percent. The comparison was impacted by unfavorable currencies, partially offset by cost savings.

Sales in North America increased 2 percent. Volumes increased 6 percent, while net selling prices were off 2 percent and product mix was unfavorable 1 percent. Paper towel volumes rose double-digits, including benefits from increased promotion shipments on Viva. Kleenex facial tissue volumes increased high-single digits behind Back to School marketing and promotion support. Bathroom tissue volumes were up mid-single digits.

Sales in developing and emerging markets decreased 26 percent, including a 29 point negative impact from currency rates. Net selling prices and volumes each rose 1 percent.

Sales in developed markets outside North America decreased 17 percent, including a 13 point drag from currency rates. Volumes were down 5 percent, mostly in Australia and Western/Central Europe, while the combined impact of changes in net selling prices and product mix benefited sales 1 percent.

K-C Professional (KCP) Segment

Third quarter sales of $0.8 billion decreased 5 percent. Changes in currency rates reduced sales 10 percent. Product mix/other was favorable by 3 percent, including sales of nonwovens to Halyard Health, Inc. in conjunction with a near-term supply agreement, and volumes rose 2 percent. Third quarter operating profit of $154 million decreased 7 percent. The comparison was impacted by unfavorable currency effects, partially offset by benefits from organic sales growth and cost savings.

Sales in North America were even with the prior year. Currency was unfavorable 1 percent. Volumes rose 1 percent, primarily due to growth in wipers.

Sales in developing and emerging markets decreased 19 percent, including a 25 point drag from currency rates. The combined impact of changes in net selling prices and product mix increased sales 4 percent and volumes improved 2 percent.

Sales in developed markets outside North America were down 12 percent. Changes in currency rates reduced sales 16 percent. Volumes increased 5 percent, mostly in South Korea and Western/Central Europe. The combined impact of changes in overall net selling prices and product mix reduced sales 1 percent.

Year-To-Date Results

For the first nine months of 2015, sales of $14.1 billion decreased 6 percent compared to the year-ago period, as changes in foreign currency exchange rates reduced sales 10 percent. Organic sales rose more than 4 percent, as volumes increased 4 percent and product mix/other was slightly favorable.

Year-to-date operating profit was $983 million in 2015 versus $2,363 million in 2014. Adjusted operating profit of $2,431 million in 2015 increased 1 percent compared to $2,415 million in 2014. Adjusted operating profit comparisons benefited from organic sales growth, FORCE cost savings of $280 million, input cost deflation of $100 million and $50 million of savings from the 2014 Organization Restructuring. Translation effects due to changes in foreign currency exchange rates lowered operating profit by $275 million and transaction effects also negatively impacted the operating profit comparisons.

Through nine months, diluted net income per share was $1.85 in 2015 and $4.25 in 2014. Adjusted earnings per share of $4.34 in 2015 increased 4 percent versus $4.16 of adjusted earnings per share from continuing operations in 2014. The increase included benefits from higher adjusted operating profit and a lower share count.

Adjusted operating profit and adjusted earnings per share in 2015 exclude pension settlement charges, 2014 Organization Restructuring costs, a balance sheet remeasurement charge in Venezuela and charges for restructuring the company's business in Turkey. Adjusted results in 2014 exclude restructuring costs for European strategic changes and a charge related to a regulatory dispute in the Middle...


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