Kimberly-Clark 2007 Annual Report Download

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KIMBERLY-CLARK 2007 ANNUAL REPORT
DELIVERING
TODAY...
BUILDING
TOMORROW

Table of contents

  • Page 1
    KIMBERLY-CLARK 2007 ANNUAL REPORT DELIVERING TODAY...BUILDING TOMORROW

  • Page 2
    ... Design Manager Herb Velazquez. In the near left photo, Designer Suzanne Sullivan shows our virtual shopping cart in action. By sharing our plans in this way and soliciting customer feedback, K-C is working to meet our customers' strategic needs and to become their indispensable partner. Innovation...

  • Page 3
    ...are helping make Kimberly-Clark's global health and hygiene brands-from household names like Kleenex, Huggies, Scott and Pull-Ups to well-known professional and healthcare brands such as WypAll and Kimberly-Clark-the ones that people choose in more than 150 countries around the world. The discussion...

  • Page 4
    ... from K-C Professional's "One Voice" global rebranding strategy to the Cottonelle brand's "Be Kind to Your Behind" campaign launched in North America in 2008. In Israel, a virtual teenager named Kita is introducing teenage girls to Kotex Young feminine pads. Featured on the product's packaging, Kita...

  • Page 5
    "Experiential events like this are a great example of our new, more innovative approach to marketing at Kimberly-Clark. " -Associate Brand Manager David Brotherton (right) with Relationship Marketing Manager Jim Schuh at a Kleenex "Let It Out" tour stop at Minnesota's Mall of America

  • Page 6
    CUSTOMER "We're really working hard to understand how our customers use our products and what we can do to provide them with even more effective solutions." -Sales Representative Rick Butler (right) watching a customer put WypAll X60 wipers to the test

  • Page 7
    ... diapers, training pants, baby wipes and toiletries. In Latin America, our program for supporting the traditional retail trade has been a key driver of double-digit sales growth, and we've rolled out a similar program in Russia and selected Asian countries. At K-C Health Care and K-C Professional...

  • Page 8
    ..., to our new Innovation Center-Asia in South Korea (pictured), Kimberly-Clark is focused on bringing the best health and hygiene solutions to customers, shoppers and users. Taking our cue from each of these stakeholder groups, we launched a parade of innovations across our businesses in 2007. These...

  • Page 9
    ... role in accelerating innovation at Kimberly-Clark. We're helping create the next generation of health and hygiene products for people around the world." -DaeGun Kim (right) of K-C's Global Science & Technology team with colleagues JeongKyung Kim (seated) and JiYeon Kim at the Innovation Center-Asia

  • Page 10
    ... our manufacturing waste turned into a useful product-one that enriches the soil and helps grow new plants and trees." -Environmental Coordinator Erick Ylave Ponte of Kimberly-Clark Peru S.R.L. (left) with Deputy General Manager Ricardo Pazos Aurich of strategic partner Ingemedios S.A.C., on-site at...

  • Page 11
    ... become FSC-accredited in 2008. Our sustainability t policies also help drive v product innov ovation. Tk Ta ke the Kl K eenex e Naturals and Scott Naturals line extensions. These tissue products contain a signifi ex f cant amount of recy cycled fi f ber and use proprietary K C technology Kg to prov...

  • Page 12
    ...2007 financial goals while making the changes necessary to enhance our future competitive position as a global health and hygiene company. "We're taking a strategic approach to our businesses globally, with a focus on building brands, fostering innovation and partnering with customers." Benefiting...

  • Page 13
    ... in baby and child care and adult care, one of our targeted growth initiatives. In fact, sales and operating profit grew at a double-digit rate for Personal Care. In Europe, we supported the diaper and baby wipes businesses by creating an innovative marketing strategy that included teaming up...

  • Page 14
    ... technology to support growth of our rolled products business. 2004 Volume Indexed to 100. GLOBAL STRATEGIC LEADERSHIP TEAM S U S T A I N A B Anthony J. Palmer Senior Vice President and Chief Marketing Officer Jan B. Spencer President of Kimberly-Clark Professional Lizanne C. Gottung Senior...

  • Page 15
    ... used in marketing K-C bath tissue brands in North America and Europe. Now the puppy can also be found in Latin America, Eastern Europe, the Middle East and Africa. Promoting a Global Customer Perspective at Kimberly-Clark Professional The company continued to extend the Kimberly-Clark Professional...

  • Page 16
    .... In 2007, Health Care hired its first medical director and added individuals with expertise in skin health, marketing, and product and technology development. Delivering on Our Financial Commitments Now let me give you a brief overview of our financial performance in 2007. Organic sales rose by...

  • Page 17
    ... We plan to repurchase $80 0 million to $1 billion worth of our shares in 20 08. In closing, K-C teams have been executing the Global Business Plan well and delivering on the company's financial objectives. At the same time, we are making significant changes that will further improve our competitive...

  • Page 18
    ..., except percentages and per share amounts Year ended December 31 INCOME STATEMENT DATA Net sales Gross profit Operating profit Share of net income of equity companies Income from continuing operations Income from discontinued operations [a] Net income 2007 2006 2005 2004 2003 $ 18,266...

  • Page 19
    ... market value of the registrant's common stock held by non-affiliates on June 30, 2007 (based on the closing stock price on the New York Stock Exchange) on such date was approximately $30.5 billion. As of February 14, 2008, there were 420,257,274 shares of the Corporation's common stock outstanding...

  • Page 20
    KIMBERLY-CLARK CORPORATION TABLE OF CONTENTS Page Part I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Part II Item 5. Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders ... 1 4 8 8 13 14 Market for ...

  • Page 21
    ... the Corporation's worldwide Personal Care, Consumer Tissue, K-C Professional & Other and Health Care operations. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity...

  • Page 22
    ..., GoodNites, Kotex, Lightdays, Depend, Poise and other brand names. The Consumer Tissue segment manufactures and markets facial and bathroom tissue, paper towels, napkins and related products for household use. Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex...

  • Page 23
    ... improved personal care, tissue, wiping, and health care products and nonwoven materials. Consolidated research and development expense was $276.8 million in 2007, $301.2 million in 2006, and $319.5 million in 2005. Foreign Market Risks The Corporation operates and markets its products globally, and...

  • Page 24
    ... increases in pulp prices. On a worldwide basis, the Corporation supplies approximately 8 percent of its virgin fiber needs from internal pulp manufacturing operations. Derivative instruments have not been used to manage these risks. A number of the Corporation's products, such as diapers, training...

  • Page 25
    ... be successful in advertising, marketing and selling its products. Changes in the policies of our retail trade customers and increasing dependence on key retailers in developed markets may adversely affect our business. The Corporation's products are sold in a highly competitive global marketplace...

  • Page 26
    ...achieve anticipated sales. The Corporation's international operations are subject to foreign market risks which may adversely affect the Corporation's financial results. Because the Corporation and its equity companies have manufacturing facilities in 39 countries and their products are sold in more...

  • Page 27
    ... our operations could be adversely impacted. As part of the Corporation's Global Business Plan, a number of administrative functions have been transferred to third-party service providers. Those functions include certain: information technology; finance and accounting; sourcing and supply management...

  • Page 28
    ...the Corporation's equity companies) and the products or groups of products made at such facilities are as follows: World Headquarters Location Dallas, Texas Operating Segments and Geographic Headquarters Roswell, Georgia Neenah, Wisconsin Milsons Point, Australia Seoul, Korea Reigate, United Kingdom...

  • Page 29
    ...wet wipes and tissue products-(1) Tennessee Loudon-tissue products-(2) Texas Del Rio-health care products Paris-diapers and training, youth and swim pants San Antonio-personal cleansing products and systems Utah Draper-health care products Ogden-diapers Washington Everett-tissue products, wipers and...

  • Page 30
    ...products Suzano-diapers, wet wipes and incontinence care products Canada Huntsville, Ontario-tissue products-(1) China Beijing-feminine care and adult care products Guangzhou-tissue products-(1) & (2) Nanjing-feminine care products Shanghai-tissue products-(1) & (2) Colombia Barbosa-wipers, business...

  • Page 31
    ... Romagnano-tissue products-(1) Korea Anyang-feminine care products, diapers and tissue products-(1) & (2) Kimcheon-tissue products and nonwovens-(1) & (2) Taejon-feminine care products, diapers and nonwovens (1) Consumer Tissue (2) K-C Professional & Other (3) Equity company production facility 11

  • Page 32
    ...-health care products South Africa Cape Town-tissue and feminine care-(1) & (2) Springs-tissue products and diapers-(1) & (2) Spain Aranguren-tissue products-(2) Arceniega-tissue products and personal cleansing products and systems-(2) Calatayud-diapers (1) Consumer Tissue (2) K-C Professional...

  • Page 33
    ...-tissue products and diapers-(1) & (2) Vietnam Binh Duong-feminine care products (1) Consumer Tissue (2) K-C Professional & Other ITEM 3. LEGAL PROCEEDINGS The Corporation is subject to federal, state and local environmental protection laws and regulations with respect to its business operations...

  • Page 34
    ... (Continued) system and a wastewater treatment facility serving industrial and municipal customers, including Kimberly-Clark's Chester Mill. Delcora also regulates the discharge of wastewater from the Chester Mill. Delcora has alleged in the summons and the administrative action that the Corporation...

  • Page 35
    ...securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Form 10-K. The Corporation regularly repurchases shares of Kimberly-Clark common stock pursuant to publicly announced share repurchase programs. During 2007, the Corporation purchased $2.8 billion worth...

  • Page 36
    ... related income tax effects, of recording the asset retirement obligation was $12.3 million, or $.03 per share. See Item 8, Note 1 to the Consolidated Financial Statements. (c) Income statement data present the results of Neenah Paper's fine and technical papers businesses as discontinued operations...

  • Page 37
    .... The Corporation's products are sold under such well-known brands as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. The Corporation has four reportable global business segments: Personal Care; Consumer Tissue; K-C Professional & Other; and Health Care. These global business segments are...

  • Page 38
    ... cost inflation in 2007, as well as continued competitive pressures. • Net sales rose 9.1 percent. • • Growth was driven by higher sales volumes, favorable currency effects, increased net selling prices and an improved product mix. Operating profit increased 24.5 percent and net income...

  • Page 39
    ... II (Continued) Analysis of Consolidated Net Sales By Business Segment Year Ended December 31 2007 2006 2005 (Millions of dollars) Personal Care ...Consumer Tissue ...K-C Professional & Other ...Health Care ...Corporate & Other ...Intersegment sales ...Consolidated ... $ 7,562.7 $ 6,740.9 $ 6,287...

  • Page 40
    ... as selling prices were raised during the year in most developing and emerging markets in response to higher raw material costs. • Worldwide net sales of K-C Professional & Other products increased 8.0 percent. Sales volumes increased more than 3 percent with double-digit growth in Latin America...

  • Page 41
    ... product mix, partially offset by lower net selling prices. In North America, net sales increased about 4 percent principally resulting from higher sales volumes for disposable diapers, continued growth in child care products-GoodNites youth pants and Pull-Ups training pants-Huggies baby wipes...

  • Page 42
    ... net selling prices and favorable product mix each contributed about 1 percent to the increase. • Analysis of Consolidated Operating Profit By Business Segment Year Ended December 31 2007 2006 2005 (Millions of dollars) Personal Care ...Consumer Tissue ...K-C Professional & Other ...Health Care...

  • Page 43
    ... charges for the Strategic Cost Reduction Plan (the "Plan") increased operating profit by $377.2 million. These charges, as discussed later in this MD&A and in Item 8, Note 2 to the Consolidated Financial Statements, are not included in the business segments. In addition, cost savings generated by...

  • Page 44
    .... In the developing and emerging markets, operating profit declined slightly as net selling price gains were more than offset by increased pulp costs, higher manufacturing costs and increased general and administrative expenses. • Operating profit for K-C Professional & Other products increased...

  • Page 45
    ... for the 2007, 2006 and 2005 costs of the strategic cost reductions by business segment and geographic area. Other income and (expense), net Other income and (expense), net for 2007 includes a gain of $16.4 million for the settlement of litigation related to prior years' operations in Latin America...

  • Page 46
    ... selling prices, materials cost inflation and higher manufacturing costs partly related to product improvements. In Europe, operating results improved due to higher sales volumes, cost savings and lower marketing, research and general expenses. Operating profit in the developing and emerging markets...

  • Page 47
    ... of companies in the developing and emerging markets. As a result of the Corporation's share repurchase program, the average number of common shares outstanding declined, which benefited 2006 net income by $.11 per share. • • Liquidity and Capital Resources Year Ended December 31 2007 2006...

  • Page 48
    ... operating performance and forecasted future cash flows, management believes the Corporation's exposure to losses, if any, under these arrangements is not material. The open purchase orders displayed in the table represent amounts the Corporation anticipates will become payable within the next year...

  • Page 49
    ...Agreement") through which it purchased approximately 29.6 million shares of its common stock from Bank of America, N.A., at an initial purchase price of $67.48 per share, or an aggregate of $2 billion. On July 30, 2007, the Corporation issued $2.1 billion of long-term notes and used a portion of the...

  • Page 50
    ... to fund working capital, capital spending, payment of dividends, repurchases of common stock and other needs in the foreseeable future. Variable Interest Entities The Corporation has interests in the following financing and real estate entities and synthetic fuel partnerships described in Item...

  • Page 51
    ... in its nonconsolidated real estate entities by the equity method of accounting or by the effective yield method, as appropriate, and has accounted for the related income tax credits and other tax benefits as a reduction in its income tax provision. As of December 31, 2007, the Corporation had net...

  • Page 52
    ... marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions, favorable end-of-aisle or in-store product displays and other activities conducted by the customers to promote the Corporation's products. Promotion accruals as of December 31, 2007 and 2006...

  • Page 53
    ... in 2007 compared with 8.28 percent in 2006 and will be 8.23 percent in 2008. The expected longterm rate of return on pension fund assets was determined based on projected long-term returns of broad equity and bond indices. The U.S. plan's historical 15-year and 20-year compounded annual returns of...

  • Page 54
    ... requires significant management judgment including estimating the future success of product lines, future sales volumes, growth rates for selling prices and costs, alternative uses for the assets and estimated proceeds from disposal of the assets. Impairment testing is conducted at the lowest...

  • Page 55
    ...used to manage business operations and to make acquisition and divestiture decisions. The use of different assumptions would increase or decrease the estimated fair value of the asset and the impairment charge. Actual outcomes may differ from the estimates. For example, if the Corporation's products...

  • Page 56
    ...years, which cannot be used currently, also give rise to net deferred tax assets. In determining the valuation allowances to establish against these deferred tax assets, the Corporation considers many factors, including the specific taxing jurisdiction, the carryforward period, income tax strategies...

  • Page 57
    ... among other things, the business outlook, including new product introductions, cost savings, anticipated costs and benefits related to the Strategic Cost Reduction Plan, anticipated benefits from the ASR program, anticipated financial and operating results, strategies, contingencies and anticipated...

  • Page 58
    ...annual test is performed to quantify the effects that possible changes in foreign currency exchange rates would have on annual operating profit based on the foreign currency contracts and transactional exposures of the Corporation and its foreign affiliates at the current year-end. The balance sheet...

  • Page 59
    ... relates to the price of pulp. Selling prices of tissue products are influenced, in part, by the market price for pulp, which is determined by industry supply and demand. On a worldwide basis, the Corporation supplies approximately 8 percent of its virgin fiber needs from internal pulp manufacturing...

  • Page 60
    ...) ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Year Ended December 31 2007 2006 2005 (Millions of dollars, except per share amounts) Net Sales ...Cost of products sold ...Gross Profit ...Marketing, research and...

  • Page 61
    ... Debt payable within one year ...Trade accounts payable ...Other payables ...Accrued expenses ...Accrued income taxes ...Dividends payable ...Total Current Liabilities ...Long-Term Debt ...Noncurrent Employee Benefits ...Long-Term Income Taxes Payable ...Deferred Income Taxes ...Other Liabilities...

  • Page 62
    ... - Shares repurchased ...- - Recognition of stock-based compensation ...- - Retirement of treasury stock ...(90,000) (112.5) Dividends declared ...- - Balance at December 31, 2006 ...478,597 Net income ...- Other comprehensive income: Unrealized translation ...- Employee postretirement benefits, net...

  • Page 63
    ... CASH FLOW STATEMENT Year Ended December 31 2007 2006 2005 (Millions of dollars) Operating Activities Net Income ...Depreciation and amortization ...Asset impairments ...Stock-based compensation ...Deferred income taxes ...Net losses on asset dispositions ...Equity companies' earnings (in...

  • Page 64
    ... useful lives, primarily ranging from 16 to 20 years. For income tax purposes, accelerated methods of depreciation are used. Purchases of computer software are capitalized. External costs and certain internal costs (including payroll and payroll-related costs of employees) directly associated...

  • Page 65
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Training and data conversion costs are expensed as incurred. Computer software costs are amortized on the straightline method over the estimated useful life of the software, which generally does not ...

  • Page 66
    ... near-term and longer-term operating and financial prospects of the equity company, and its longer-term intent of retaining the investment in the equity company. Revenue Recognition Sales revenue for the Corporation and its reportable business segments is recognized at the time of product shipment...

  • Page 67
    ... fair values have been determined using market information. Other financial instruments including cash equivalents, time deposits and short-term debt are recorded at cost, which approximates fair value. The fair values of long-term debt, redeemable preferred securities of subsidiary and derivatives...

  • Page 68
    ... plan in purchase accounting, and capitalize the value of acquired research and development as an indefinite-lived intangible asset, subject to impairment accounting, rather than being expensed at the acquisition date. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008...

  • Page 69
    ... closed and are being marketed for sale. The following pretax charges were incurred in connection with the strategic cost reductions: Year Ended December 31 2007 2006 2005 (Millions of dollars) Noncash charges ...Charges for workforce reductions ...Other cash charges ...Charges for special pension...

  • Page 70
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table summarizes the noncash charges: Year Ended December 31 2007 2006 2005 (Millions of dollars) Incremental depreciation and amortization ...Asset impairments ...Asset write-offs ......

  • Page 71
    ...been recorded at the business segment level, as the strategic cost reductions are corporate decisions. These charges are included in the following income statement captions: Year-Ended December 31 2007 2006 2005 (Millions of dollars) Cost of products sold ...Marketing, research and general expenses...

  • Page 72
    ... in customer development and product supply to drive growth and profitability across its businesses in Indonesia and Brazil. Goodwill The changes in the carrying amount of goodwill by business segment are as follows: Personal Care K-C Consumer Professional Health Tissue & Other Care (Millions...

  • Page 73
    ... value of total long-term debt, based on quoted market prices for the same or similar debt issues, was approximately $4.8 billion and $2.8 billion at December 31, 2007 and 2006, respectively. Scheduled maturities of long-term debt for the next five years are $241.1 million in 2008, $69.9 million in...

  • Page 74
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) remarketed by the dealer or repaid by the Corporation. In the fourth quarter of 2007, the Corporation remarketed these securities at 4.42%. Proceeds from the issuance of the notes in 2006 were used for...

  • Page 75
    ...the end of three or four years. Restricted shares, time-based restricted share units and performance-based restricted share units granted to employees are valued at the closing market price of the Corporation's common stock on the grant date and generally vest over three to five years. The number of...

  • Page 76
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) for stock options was recognized in the Consolidated Income Statement for periods prior to January 1, 2006, as all stock options granted had an exercise price equal to the market value of the ...

  • Page 77
    ... per share ("EPS") as if the Corporation had applied the fair value expense recognition requirements of SFAS 123 to all stock options granted under the Equity Participation Plan: Year Ended December 31, 2005 (Millions of dollars) Net income, as reported ...Add: Stock-based compensation expense...

  • Page 78
    ... $348.9 million. The total intrinsic value of stock options exercised during 2007 was $85.7 million; the Corporation received a related income tax benefit of about $30.3 million. Time-Based Restricted Share Units WeightedAverage Shares Grant-Date (000's) Fair Value Performance-Based Restricted...

  • Page 79
    ...: Pension Benefits Other Benefits Year Ended December 31 2007 2006 2007 2006 (Millions of dollars) Change in Benefit Obligation Benefit obligation at beginning of year ...Service cost ...Interest cost ...Actuarial (gain) loss ...Currency and other ...Benefit payments from plans ...Direct benefit...

  • Page 80
    ... the expected long-term rate of return. Weighted-Average Assumptions used to determine Net Cost for years ended December 31 Pension Benefits 2007 2006 2005 2007 Other Benefits 2006 2005 Discount rate ...Expected long-term return on plan assets ...Rate of compensation increase ... 5.64% 5.47% 5.68...

  • Page 81
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Expected Long-Term Rate of Return and Investment Strategies for the Principal Plans The expected long-term rate of return on pension fund assets was determined based on projected long-term returns of ...

  • Page 82
    ...Bank of America, at its discretion, to accelerate the program so that the Repurchase Period may end as early as March 10, 2008. The initial purchase price per share is subject to an adjustment based on the volume weighted average price per share of the Corporation's shares of common stock during the...

  • Page 83
    ...158: Year Ended December 31, 2006 Pretax Tax Net Amount Effect Amount (Millions of dollars) Reversal of minimum pension liability ...Unrecognized net actuarial loss and transition amount: Pension benefits ...Other postretirement benefits ...Unrecognized prior service cost: Pension benefits ...Other...

  • Page 84
    ... changed reported comprehensive income from $1,736.7 million to $2,131.9 million. Below is the detailed statement of 2007 other comprehensive income: Year Ended December 31, 2007 Pretax Tax Net Amount Effect Amount (Millions of dollars) Unrealized translation ...Defined benefit pension plans...

  • Page 85
    ... cost in 2008. Note 9. Risk Management As a multinational enterprise, the Corporation is exposed to risks such as changes in foreign currency exchange rates, interest rates and commodity prices. The Corporation employs a variety of practices to manage these risks, including operating and financing...

  • Page 86
    ... gas. Selling prices of tissue products are influenced, in part, by the market price for pulp, which is determined by industry supply and demand. On a worldwide basis, the Corporation sources approximately 8 percent of its virgin fiber needs from internal pulp manufacturing operations. Increases in...

  • Page 87
    ... of related income taxes, and recognized in income at the time the cost of the natural gas was recognized in income. Effect of Derivative Instruments on Results of Operations and Other Comprehensive Income Fair Value Hedges The Corporation's fair value hedges offset the effect of the hedged items in...

  • Page 88
    ... and tax losses that are used to reduce the Corporation's income tax liabilities. The Corporation invested in these markets through (i) investments in various funds in which the Corporation is one of many noncontrolling investors, (ii) limited liability companies as a nonmanaging member and (iii...

  • Page 89
    ... in its nonconsolidated real estate entities by the equity method of accounting or by the effective yield method, as appropriate, and has accounted for the related income tax credits and other tax benefits as a reduction in its income tax provision. As of December 31, 2007, the Corporation had net...

  • Page 90
    ..., Delcora initiated an administrative action against the Corporation. Delcora is a public agency that operates a sewerage system and a wastewater treatment facility serving industrial and municipal customers, including Kimberly-Clark's Chester Mill. Delcora also regulates the discharge of wastewater...

  • Page 91
    ... the IRS and because the partnerships' test procedures conform to IRS guidance, the Corporation's loss exposure under the synthetic fuel partnerships is minimal. Note 15. Income Taxes An analysis of the provision for income taxes follows: Year Ended December 31 2007 2006 2005 (Millions of dollars...

  • Page 92
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income before income taxes is earned in the following tax jurisdictions: Year Ended December 31 2007 2006 2005 (Millions of dollars) United States ...Other countries ...Total income before income ...

  • Page 93
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) in Latin America and utilization of excess foreign tax credits. Valuation allowances at the end of 2007 primarily relate to excess foreign tax credits in the U.S. and income tax loss carryforwards of $...

  • Page 94
    ...'s financial condition, results of operations or liquidity. As of December 31, 2007, the following tax years remain subject to examination for the major jurisdictions where the Corporation conducts business: Jurisdiction Years United States ...United Kingdom ...Canada ...Korea ...Australia...

  • Page 95
    ... the Corporation's worldwide Personal Care, Consumer Tissue, K-C Professional & Other and Health Care operations. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity...

  • Page 96
    ..., GoodNites, Kotex, Lightdays, Depend, Poise and other brand names. The Consumer Tissue segment manufactures and markets facial and bathroom tissue, paper towels, napkins and related products for household use. Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex...

  • Page 97
    ... the business segments, including the following amounts of pretax charges for the strategic cost reductions and the related implementation costs in 2007 of $27.1 million. K-C Consumer Professional Health Tissue & Other Care (Millions of dollars) Personal Care Total Corporate & Other 2007 ...2006...

  • Page 98
    ...Equity companies, primarily in Latin America, are principally engaged in operations in the Personal Care and Consumer Tissue businesses. At December 31, 2007, the Corporation's equity companies and ownership interest were as follows: Kimberly-Clark Lever, Ltd. (India) (50%), Kimberly-Clark de Mexico...

  • Page 99
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Supplemental Balance Sheet Data December 31 2007 2006 Summary of Accounts Receivable, net Accounts Receivable: From customers ...Other ...Less allowance for doubtful accounts and sales discounts ......

  • Page 100
    ... Cash Flow Statement Data Summary of Cash Flow Effects of Decrease (Increase) in Operating Working Capital(a) Year Ended December 31 2007 2006 2005 Accounts receivable ...Inventories ...Prepaid expenses ...Trade accounts payable ...Other payables ...Accrued expenses ...Accrued income taxes...

  • Page 101
    ... Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R). We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation's internal control over financial reporting as...

  • Page 102
    ... Committee also reviews with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of the Corporation's internal control over financial reporting, including compliance matters related to the Corporation's code of conduct, and the results of...

  • Page 103
    ... of information and business ideas. Internal controls have been implemented to provide reasonable assurance that the code of conduct is followed. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining an adequate system of internal...

  • Page 104
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule of the Corporation as of and for the year ended December 31, 2007, and our report dated February 20, 2008, expressed an unqualified opinion on...

  • Page 105
    ...' Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R), on December 31, 2006. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Dallas, Texas February 20, 2008 Changes in Internal Control Over Financial Reporting There...

  • Page 106
    ... American Diaper Operations in 1992; Managing Director of Kimberly-Clark Australia Pty. Limited in 1994; and Group President of the Corporation's Business-to-Business segment in 1998. He is a director of The Lubrizol Corporation. Joanne B. Bauer, 52, was elected President-Global Health Care in 2006...

  • Page 107
    ... sales and management positions in Europe and the U.S. He was appointed Vice President Research, Development & Engineering in the Away From Home sector in 1996; Vice President, Wiper Business in 1998; Vice President, European Operations, Engineering, Supply Chain in the K-C Professional sector...

  • Page 108
    ... restricted share units, or any combination of cash, options, stock, stock appreciation rights, restricted shares or restricted share units under this plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information in the sections of the 2008 Proxy Statement...

  • Page 109
    ...-term debt will be furnished to the Securities and Exchange Commission on request. Management Achievement Award Program, as amended and restated, incorporated by reference to Exhibit (10)a of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2005. Executive Severance Plan...

  • Page 110
    ...' Stock Compensation Plan, as amended, incorporated by reference to Exhibit No. (10)g of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2002. Supplemental Benefit Plan to the Kimberly-Clark Corporation Pension Plan, as amended, dated December 31, 2005, incorporated...

  • Page 111
    ... duly authorized. KIMBERLY-CLARK CORPORATION February 22, 2008 By: /s/ MARK A. BUTHMAN Mark A. Buthman Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 112
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (Millions of dollars) Balance at Beginning of Period Additions Charged to Charged Costs and to Other Expenses Accounts(a) Deductions Write-Offs and ...

  • Page 113
    KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (Millions of dollars) Balance at Beginning of Period Additions Charged to Charged Costs and to Other Expenses Accounts Balance at End of Period Description...

  • Page 114
    ...and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 22, 2008 /s/ Thomas J. Falk Thomas J. Falk Chief Executive Officer 3. 4. 94

  • Page 115
    ...summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 22, 2008 /s/ Mark A. Buthman Mark A. Buthman Chief Financial Officer...

  • Page 116
    ...$90 $80 Dec02 Dec03 Dec04 S&P 500 INDEX Dec05 Dec06 Dec07 KIMBERLY-CLARK CORP S&P 500 CONSUMER STAPLES INDEX Indexed Returns Company Name/Index Dec 02 Dec 03 Year Ending Dec 04 Dec 05 Dec 06 Dec 07 Kimberly-Clark Corporation ...S&P 500 Index ...S&P 500 Consumer Staples Index ... 100 100 100...

  • Page 117
    ... the Corporation's Chief Executive Officer for the prior year certifying that he is not aware of any violation by the Corporation of the New York Stock Exchange corporate governance listing standards as of the date of such certification. Investor Relations Securities analysts, portfolio managers and...

  • Page 118
    ... our results of operations, as well as assisting investors in evaluating how well the Corporation is executing the material changes to our enterprise contemplated by the Global Business Plan, including the strategic cost reduction plan. Also, many financial analysts who follow our company focus on...

  • Page 119
    ...our business units and their managers and excludes the gain when making decisions to allocate resources among our business units. Gain on Sale of Business. In the fourth quarter of 2006, the Corporation's equity affiliate, Kimberly-Clark de Mexico, S.A.B. de C.V. sold its pulp and paper business and...

  • Page 120
    ...$16 million, or 2 cents per share, as a result of a legal judgment related to a 1987 European government grant to a facility that was sold in 1998. Management excludes this charge when evaluating operating performance of the Corporation. Callable Bonds. The Corporation redeemed $200 million of 7.875...

  • Page 121
    ...-GAAP financial measure to reported GAAP net sales: Percent Change in Consolidated Net Sales Year Ended December 31 2005 2006 2007 Volume ...Net Price ...Mix/Other ...Organic Net Sales growth ...Currency ...Impact of 11/30/04 spin-off of Neenah Paper ...Percent change in reported Net Sales ...101...

  • Page 122
    ... of the Board, President and Chief Executive Officer A.H. Belo Corporation G. CRAIG SULLIVAN Management Development and Compensation Committee Nominating and Corporate Governance Committee Retired Chairman and Chief Executive Officer The Clorox Company IAN C. READ Audit Committee Design: RKC...

  • Page 123
    ... a store representative. This combined focus on innovative marketing and customer development is part of our core strategy for longterm growth. KIMBERLY-CLARK CORPORATION WORLD HEADQUARTERS P.O. BOX 619100, DALLAS, TEXAS 75261-9100 Toll-Free Investor Information: 800.639.1352 www.kimberly-clark.com