Kimberly-Clark Announces Year-End 2012 Results and
Kimberly-Clark Announces Year-End 2012 Results and 2013 Outlook
DALLAS, January 25, 2013-Kimberly-Clark Corporation (NYSE: KMB) today reported year-end 2012 results and provided its 2013 outlook and related key planning assumptions.
Executive Summary
Fourth quarter 2012 net sales of $5.3 billion increased 3 percent compared to the year-ago period. Organic sales rose 5 percent, highlighted by a 9 percent increase in K-C International. Organic sales exclude the impact of changes in foreign currency rates and lost sales as a result of pulp and tissue restructuring actions.
Diluted net income per share for the fourth quarter of 2012 was $0.68 versus $1.01 in 2011. Full-year diluted net income per share was $4.42 in 2012 and $3.99 in 2011.
Fourth quarter adjusted earnings per share were $1.37 in 2012 compared to $1.28 in the prior year. The improvement in fourth quarter adjusted earnings per share was driven by organic sales growth and cost savings, partially offset by increased marketing, research and general spending and a higher level of expense in other (income) and expense, net.
Full-year adjusted earnings per share were $5.25 in 2012 compared to $4.80 in 2011 and the company's previous guidance of $5.15 to $5.25. Fourth quarter and full-year adjusted earnings per share in both periods exclude costs for pulp and tissue restructuring actions. Fourth quarter adjusted earnings per share in 2012 also exclude costs for the European strategic changes announced in October of 2012. Full-year adjusted earnings per share in 2011 also exclude a business tax charge related to a law change in Colombia.
Cash provided by operations in the fourth quarter of 2012 was an all-time record $1,119 million, up 116 percent compared to the prior year.
Adjusted earnings per share in 2013 are expected to be $5.50 to $5.65, up 5 to 8 percent compared to 2012. Adjusted earnings per share in 2013 exclude costs for the European strategic changes.
The company expects to increase its dividend at a high-single digit rate effective April 2013. This will represent the company's 41st consecutive annual increase in the dividend.
Share repurchases are anticipated to total $1.0 to $1.2 billion in 2013.
Chairman and Chief Executive Officer Thomas J. Falk said, "Our fourth quarter results capped off a year of excellent performance for Kimberly-Clark. For the full year of 2012, we delivered organic sales growth of 5 percent, highlighted by 10 percent growth in K-C International. We launched a number of product innovations and increased strategic marketing spending by $115 million and research and development spending at a double-digit rate. We improved adjusted gross margin by 230 basis points and adjusted operating profit margin by 90 basis points, aided by $335 million of cost savings from our ongoing FORCE program and restructuring actions. We grew adjusted earnings per share by 9 percent, above our original plan for the year and at the high end of our long-range target. Finally, we generated very strong cash flow, which allowed us to return $2.5 billion to shareholders through dividends and share repurchases. Overall, we had a very good year of financial performance and I'm encouraged by the progress we made in 2012."
Falk added, "The strength of our results this past year gives us added confidence that we will continue to execute our Global Business Plan well going forward. In 2013, we will continue to pursue targeted growth initiatives, launch product innovations and support our brands with increased strategic marketing spending. We expect to achieve healthy levels of cost savings, which should help us overcome moderate commodity cost inflation. We will continue to manage our company with financial discipline, including a strong focus on cash generation and shareholder-friendly capital allocation. We are optimistic about our plans and continue to believe that successful execution of our strategies will generate strong returns to shareholders."
Fourth Quarter 2012 Operating Results
Sales of $5.3 billion in the fourth quarter of 2012 were up 3 percent compared to the year-ago period. Organic sales rose 5 percent, with increased sales volumes of 3 percent and higher net selling prices of 2 percent. Changes in foreign currency rates and lost sales from exiting non-strategic products in conjunction with pulp and tissue restructuring actions each reduced sales by 1 percent.
Operating profit was $449 million in the fourth quarter of 2012, down 27 percent from $611 million in 2011. Adjusted operating profit was $798 million in the fourth quarter of 2012, up 5 percent compared to $759 million in the year-ago period. Adjusted results exclude costs for pulp and tissue restructuring actions of $50 million in 2012 and $148 million in 2011. Adjusted results in 2012 also exclude $299 million of costs for European strategic changes.
The increase in year-over-year adjusted operating profit included benefits from organic sales growth and $80 million in cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program. In addition, costs for key materials were $15 million lower overall versus 2011, with $20 million of lower fiber costs and a $15 million decrease for other raw materials, partially offset by $15 million of higher distribution costs and $5 million of higher energy costs. Higher production volumes in 2012 positively affected the operating profit comparison by $15 million. Overall marketing, research and general expenses increased versus the year-ago period. The higher spending included increased administrative expenses, in part to support future growth, particularly in K-C International. Strategic marketing spending rose $10 million, primarily to support product innovations and targeted growth initiatives. Other (income) and expense, net was $9 million of expense in the fourth quarter of 2012 compared to $24 million of income in the prior year. The change was driven by a gain on the sale of a small venture investment in a health care start-up company in 2011.
The company's fourth quarter effective tax rate was 38.5 percent in 2012 and 29.6 percent in 2011. The fourth quarter adjusted effective tax rate, which excludes the effects of the previously mentioned items excluded from adjusted earnings per share calculations, was 30.6 percent in 2012 and 29.2 percent in 2011. The full-year adjusted effective tax rate in 2012 was 30.6 percent, consistent with the company's expectation for an adjusted rate between 30 and 32 percent.
Kimberly-Clark's share of net income of equity companies in the fourth quarter of 2012 was $51 million compared to $39 million in 2011. At Kimberly-Clark de Mexico, S.A.B. de C.V., results benefited from double-digit sales growth and increased operating profit margins.
Cash Flow and Balance Sheet
Cash provided by operations in the fourth quarter of 2012 was an all-time record and totaled $1,119 million compared to $517 million in the prior year. The increase was driven by improved working capital and lower defined benefit pension plan contributions. Fourth quarter pension contributions totaled $15 million in 2012 and $265 million in 2011. Cash provided by operations for the full year was $3,288 million in 2012 compared to $2,288 million in 2011. The increase was driven by higher cash earnings, improved working capital and lower pension contributions ($110 million in 2012 compared to $680 million in 2011).
Capital spending for the fourth quarter was $330 million in 2012 and $312 million in 2011. Full-year 2012 spending totaled $1,093 million, consistent with the company's target for spending in a range of $1.0 to $1.1 billion. During the fourth quarter, the company repurchased approximately 3.8 million shares of its common stock at a cost of $320 million. Full-year 2012 share repurchases totaled 16.4 million shares at a cost of $1.3 billion. Total debt and redeemable securities was $6.7 billion at December 31, 2012 and at the end of 2011.
Fourth Quarter 2012 Business Segment Results
Personal Care Segment
Fourth quarter sales of $2.4 billion increased 8 percent. Sales volumes rose 6 percent and net selling prices improved 3 percent, while changes in currency rates reduced sales by 1 percent. Fourth quarter operating profit of $419 million increased 23 percent. The improvement included benefits from organic sales growth, cost savings and higher production volumes, partially offset by increased marketing, research and general expenses and higher manufacturing costs.