Kimberly-Clark 2007 Annual Report Download - page 50

PART II
(Continued)
• For the full year 2007, the Corporation repurchased 41.2 million shares of its common stock at a cost of
approximately $2.8 billion, including those in the ASR Agreement and approximately 3.9 million shares
repurchased during the fourth quarter at a cost of approximately $269 million. The monthly detail of
share repurchases for the fourth quarter of 2007 is included in Part II, Item 5 of this Form 10-K.
• The Corporation has not experienced difficulty in issuing commercial paper in 2008 despite the current
constrained credit environment in the United States (“U.S.”).
Management believes that the Corporation’s ability to generate cash from operations and its capacity to
issue short-term and long-term debt are adequate 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 8, Notes 10, 11 and 14 to the Consolidated Financial Statements, all of which are
subject to the requirements of Financial Accounting Standards Board Interpretation No. 46 (Revised December
2003), Consolidation of Variable Interest Entities—an Interpretation of ARB 51 (“FIN 46R”).
Financing Entities
The Corporation holds a significant interest in two financing entities that were used to monetize long-term
notes received from the sale of certain nonstrategic timberlands and related assets to nonaffiliated buyers. These
transactions qualified for the installment method of accounting for income tax purposes and met the criteria for
immediate profit recognition for financial reporting purposes contained in SFAS No. 66, Accounting for Sales of
Real Estate. These sales involved notes receivable with an aggregate face value of $617 million and a fair value
of approximately $593 million at the date of sale. The notes receivable are backed by irrevocable standby letters
of credit issued by money center banks, which aggregated $617 million at December 31, 2007.
Because the Corporation desired to monetize the $617 million of notes receivable and continue the deferral
of current income taxes on the gains, it transferred the notes received from the sales to noncontrolled financing
entities. The Corporation has minority voting interests in each of the financing entities (collectively, the
“Financing Entities”). The transfers of the notes and certain other assets to the Financing Entities were made at
fair value, were accounted for as asset sales and resulted in no gain or loss. In conjunction with the transfer of the
notes and other assets, the Financing Entities became obligated for $617 million in third-party debt financing. A
nonaffiliated financial institution has made substantive capital investments in each of the Financing Entities, has
majority voting control over them and has substantive risks and rewards of ownership of the assets in the
Financing Entities. The Corporation also contributed intercompany notes receivable aggregating $662 million
and intercompany preferred stock of $50 million to the Financing Entities, which serve as secondary collateral
for the third-party lending arrangements. In the unlikely event of default by both of the money center banks that
provided the irrevocable standby letters of credit, the Corporation could experience a maximum loss of $617
million under these arrangements.
The Corporation has not consolidated the Financing Entities because it is not the primary beneficiary of
either entity. Rather, it will continue to account for its ownership interests in these entities using the equity
method of accounting. The Corporation retains equity interests in the Financing Entities for which the legal right
of offset exists against the intercompany notes. As a result, the intercompany notes payable have been offset
against the Corporation’s equity interests in the Financing Entities for financial reporting purposes.
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