Kimberly-Clark 2007 Annual Report Download - page 45

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PART II
(Continued)
By the end of 2008, management anticipates there will be a net workforce reduction of about 10 percent, or
approximately 6,000 employees. As of December 31, 2007, a net workforce reduction of approximately 4,700
had occurred. Approximately 24 manufacturing facilities, or 17 percent of the Corporation’s worldwide total, are
expected to be sold, closed or streamlined. There is a particular focus on Europe, aimed at improving business
results in the region. The Corporation intends to continue to consolidate and streamline manufacturing facilities,
further improve operating efficiencies, and reduce selling, general and administrative expenses while reinvesting
in key growth opportunities there. As of December 31, 2007, charges have been recorded related to the cost
reduction initiatives for 23 facilities.
The strategic cost reductions are corporate decisions and are not included in the business segments’
operating profit performance. See Item 8, Note 17 to the Consolidated Financial Statements 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. Currency transaction losses included in this line item were
about $10 million lower in 2007 than in 2006. In addition, gains on dispositions of facilities in 2007, as part of
the Strategic Cost Reduction Plan, were about $14 million compared with costs of $8 million in 2006.
Commentary:
2006 versus 2005
Percentage Change in Operating Profit Versus Prior Year
Change Due To
Total
Change Volume
Net
Price
Raw
Materials
Cost
Energy and
Distribution
Expense Currency Other(a)
Consolidated ......................... (9.0) 7 9 (10) (8) 2 (9)(b)
Personal Care ......................... 4.9 10 (5) (7) (2) 2 7
Consumer Tissue ...................... (4.1) (2) 23 (11) (13) — (1)
K-C Professional & Other ............... (.1) 1 12 (7) (7) 1 —
Health Care .......................... 5.4 18 4 (12) (5) — —
(a) Includes the benefit of cost savings achieved, net of higher marketing and general expenses.
(b) Charges for strategic cost reductions were $255.8 million higher in 2006 than in 2005.
Consolidated operating profit declined 9.0 percent or $209.1 million. Primary factors that affected the
comparison were approximately $256 million of higher charges in 2006 for the Strategic Cost Reduction Plan
that are not included in the business segments (as previously discussed in this MD&A and in Item 8, Note 2 to
the Consolidated Financial Statements), cost inflation of about $385 million and higher marketing, research and
general expenses. Partially offsetting those factors were gross cost savings of about $265 million, higher net
selling prices and increased sales volumes. As discussed in Item 8, Note 6 to the Consolidated Financial
Statements, effective January 1, 2006, the Corporation adopted Statement of Financial Accounting Standards
(“SFAS”) No. 123R, Share-Based Payment (“SFAS 123R”). Stock option expense, under the provisions of
SFAS 123R, reduced 2006 operating profit by about $35 million. Operating profit as a percent of net sales
declined to 12.5 percent from 14.5 percent in 2005.
• Operating profit for personal care products increased 4.9 percent. Cost savings and higher sales volumes
more than offset raw material cost inflation—primarily for polymer resins and superabsorbents—and
lower net selling prices.
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