Kimberly-Clark 2008 Annual Report Download - page 45

PART II
(Continued)
Consolidated operating profit increased $514 million or 24.5 percent. Lower charges for the strategic cost
reduction plan increased operating profit by $377 million. These charges are not included in the business
segments. In addition, cost savings generated by the plan totaled approximately $105 million during 2007. Other
factors affecting the comparison with 2006 were savings of nearly $160 million for the Corporation’s Focused
On Reducing Costs Everywhere program, higher sales volumes and increased net selling prices. Partially
offsetting these improvements were raw materials cost inflation of almost $350 million, increased strategic
marketing expenses of about $50 million and higher general and administrative expenses. The increased general
and administrative expenses were to a large extent in support of growth in the developing and emerging markets.
Operating profit as a percent of net sales increased to 14.3 percent from 12.6 percent in 2006.
• Operating profit for personal care products increased 19.9 percent. Cost savings and higher sales
volumes more than offset raw materials cost inflation, the costs for product improvements and increased
general and administrative expenses.
Operating profit in North America increased nearly 13 percent primarily on the strength of higher sales
volumes. Cost savings and slightly higher net selling prices offset the effect of raw materials cost
inflation. Increased operating profit in Europe was driven by cost savings and higher sales volumes,
despite lower net selling prices. Operating profit in the developing and emerging markets increased
more than 25 percent on sales volume growth and cost savings that more than offset increased
marketing and general and administrative expenses.
• Operating profit for consumer tissue products decreased 9.2 percent as higher net selling prices and cost
savings were more than offset by raw materials cost inflation, the costs for product improvements and
higher manufacturing costs.
In North America, operating profit declined more than 15 percent because higher net selling prices were
more than offset by raw materials cost inflation, primarily pulp costs, the costs of product improvements
and higher manufacturing costs. Operating profit in Europe increased due to cost savings and favorable
currency effects tempered by raw materials cost inflation and higher marketing and general and
administrative expenses. 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 1.3 percent because higher sales
volumes, increased net selling prices and cost savings were substantially negated by cost inflation for
both virgin fiber and wastepaper.
• Operating profit for health care products decreased 7.6 percent as the benefits of cost savings and
favorable currency effects were more than offset by raw materials cost inflation, primarily for
nonwovens, and increased distribution and selling expenses.
Other income and (expense), net
Other income and (expense), net for 2007 includes a gain of $16 million for the previously mentioned
settlement of litigation 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.
Additional Income Statement Commentary
Synthetic Fuel Partnerships
As described in Item 8, Note 15 to the Consolidated Financial Statements, the Corporation had minority
interests in two synthetic fuel partnerships. Pretax losses from participation in these partnerships were reported as
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