Kimberly-Clark 2007 Annual Report Download - page 47

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PART II
(Continued)
• The Corporation’s effective income tax rate was 23.1 percent for 2007 compared with 25.4 percent in
2006. The decrease for 2007 was primarily due to favorable settlements of tax issues related to prior
years and the reversal of valuation allowances on deferred tax assets at certain majority-owned
subsidiaries in Latin America based on a sustained improvement in the subsidiaries’ operating results
partially offset by lower foreign tax credit benefits in 2007.
• The Corporation’s share of net income from equity companies decreased $48.6 million primarily due to
lower net income at Kimberly-Clark de Mexico, S.A.B. de C.V. (“KCM”). Included in 2006 results was
a gain of $45.6 million from the sale by KCM of its pulp and paper business. The remainder of the
decline was due to lower operating profit at KCM as net sales growth did not overcome the effect of
higher raw materials costs.
• Minority owners’ share of subsidiaries net income increased $33.3 million primarily due to the minority
owners’ share of the above-mentioned tax benefits at majority-owned subsidiaries.
• As a result of the Corporation’s share repurchase program, including the Accelerated Share Repurchase
(“ASR”) program, the average number of common shares outstanding declined, which benefited 2007
net income by $.14 per share. This benefit was mostly offset by the higher interest expense associated
with the third quarter 2007 debt issuances that funded the ASR. See Item 8, Note 8 to the Consolidated
Financial Statements for detail on the ASR.
2006 versus 2005
• Interest expense increased primarily due to higher average interest rates.
• The Corporation’s effective tax rate was 25.4 percent in 2006 compared with 22.3 percent in 2005
primarily due to the reduced benefits from the synthetic fuel partnerships discussed above.
• The Corporation’s share of net income of equity companies increased $82.0 million including the
$45.6 million gain from the sale of KCM’s pulp and paper business in the fourth quarter of 2006. The
remainder of the increase was driven by continued double-digit profit growth for KCM’s consumer
business as well as lower currency transaction losses at KCM compared with 2005.
• Minority owners’ share of subsidiaries’ net income increased $8.3 million primarily because of higher
earnings 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
(Millions of dollars)
Cash provided by operations ................................................. $2,428.9 $2,579.5
Capital spending .......................................................... 989.3 972.1
Acquisitions of businesses, net of cash acquired ................................. 15.7 99.6
Ratio of total debt and redeemable preferred securities to capital(a) ................... 53.2% 40.3%
Pretax interest coverage—times .............................................. 8.2 8.0
(a) Capital is total debt and redeemable preferred securities plus stockholders’ equity and minority owners’ interest in subsidiaries.
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