Kimberly-Clark 2010 Annual Report Download - page 26

PART II
(Continued)
• Operating profit for the personal care segment increased 5.5 percent as higher net selling prices,
materials and other cost deflation, and cost savings were partially offset by organization optimization
severance charges, unfavorable currency effects, higher operating costs and increased marketing
expense. In North America, operating profit increased due to higher net selling prices, materials and
other cost deflation, and cost savings, tempered by organization optimization severance charges and
increased marketing expenses. In Europe, operating profit declined as increased sales volumes were
more than offset by lower net selling prices and organization optimization severance charges. Operating
profit in K-C International increased as higher net selling prices and the benefits of volume growth were
only partially offset by unfavorable currency effects.
• Consumer tissue segment operating profit increased 22.5 percent. Materials and other cost deflation,
higher net selling prices and cost savings were partially offset by lower sales volumes, increased selling
and marketing spending, organization optimization severance charges and negative effects of production
down-time which occurred earlier in 2009, in part to drive inventory reductions. Operating profit in
North America increased due to the same factors that affected the overall segment. In Europe, operating
profit increased as materials and other cost deflation were only partially offset by unfavorable currency
effects, lower net selling prices, and lower sales volumes. Operating profit in K-C International
increased as higher net selling prices and materials and other cost deflation were partially offset by
increased marketing expenses, unfavorable currency effects and lower sales volumes.
• Operating profit for K-C Professional & Other products increased 8.4 percent as higher net selling
prices and materials and other cost deflation were partially offset by organization optimization
severance charges, lower sales volumes, negative effects of production down-time, in part to drive
reductions in inventory, increased general expense, partially as a result of the Jackson acquisition, and
unfavorable currency effects.
• Operating profit for the health care segment increased 70.6 percent. The benefit of higher sales volumes,
materials cost deflation, manufacturing production efficiencies and cost savings were partially offset by
higher selling expenses, as a result of the I-Flow acquisition, and lower net selling prices.
Other (income) and expense, net
Other (income) and expense, net for 2009 includes currency transaction losses of $110 million, an increase
of $92 million over 2008, partially offset by additional favorable settlements of value-added tax matters in Latin
America. Approximately $73 million of the currency transaction losses in 2009 related to operations in
Venezuela.
Additional Income Statement Commentary
2010 versus 2009
• Interest expense decreased due to a lower average level of debt and lower average interest rates. See
Item 8, Note 8 to the Consolidated Financial Statements for detail on debt activity.
• Our effective income tax rate was 30.9 percent for 2010 compared with 29.0 percent for 2009. The
increase was primarily due to nondeductible currency losses resulting from the adoption of highly
inflationary accounting in Venezuela and changes in U.S. tax legislation, including a charge related to
the Medicare Part D subsidy.
• Our share of net income of equity companies increased by $17 million primarily due to higher earnings
at Kimberly-Clark de Mexico, S.A.B. de C.V. (“KCM”). KCM’s U.S. dollar earnings benefited from the
Mexican peso strengthening against the U.S. dollar by about 7 percent on average for the year, increases
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