Kimberly-Clark 2010 Annual Report Download - page 56

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Subsequent to December 31, 2010, the maturity date of a $397 million monetization loan (see Note 2 for
further details) was extended to January 31, 2014. As a result of this extension, we have classified the loan as
long-term debt on our December 31, 2010 Consolidated Balance Sheet.
At December 31, 2010, we had a $1.33 billion revolving credit facility that is scheduled to expire in
September 2012. This facility contains a feature that would allow for increasing it to $1.77 billion. We maintain
the revolving credit facility to manage liquidity needs in the event our access to the commercial paper markets is
constrained for any reason. We did not borrow any amounts under the revolving credit facility in 2010.
Note 9. Redeemable Preferred and Common Securities of Subsidiaries
In February 2001, we, together with a non-affiliated third party entity (the “Third Party”), formed a
Luxembourg-based financing subsidiary. We are the primary beneficiary of the subsidiary and, accordingly,
consolidate the subsidiary in our Consolidated Financial Statements.
The Third Party has investments in two classes of voting-preferred securities issued by the subsidiary (the
“Preferred Securities”). The two classes of Preferred Securities, Class A-1 and Class A-2, have a par value of
$500 million each for an aggregate of $1 billion. The Preferred Securities represent 98 percent of the voting
power of the subsidiary. The Class A-1 and Class A-2 Preferred Securities accrue a fixed annual rate of return of
5.074 percent and 5.417 percent, respectively, which is paid on a quarterly basis. The Class A-1 Preferred
Securities are redeemable by the subsidiary in December 2011 and on each 7-year anniversary thereafter, at par
value plus any accrued but unpaid return. The Class A-2 Preferred Securities are redeemable in December 2014
and on each 7-year anniversary thereafter, at par value plus any accrued but unpaid return.
In December 2010, the subsidiary elected to redeem the Class A-1 Preferred Securities in December
2011. As a result, the $506 million redemption value of the Class A-1 Preferred Securities is included in current
liabilities as of December 31, 2010 on our Consolidated Balance Sheet.
The subsidiary also has issued voting-preferred and common securities to Kimberly-Clark for total cash
proceeds of $500 million. These securities are entitled to a combined two percent vote, and the common
securities are entitled to all of the residual equity after satisfaction of the preferred interests.
Approximately 98 percent of the total cash contributed to the entity has been loaned to Kimberly-Clark.
These long-term loans bear fixed annual interest rates. The funds remaining in the financing subsidiary are
invested in equity-based exchange-traded funds. The preferred and common securities of the subsidiary held by
Kimberly-Clark and the intercompany loans have been eliminated in our Consolidated Financial Statements. The
return on the Preferred Securities is included in net income attributable to noncontrolling interests in our
Consolidated Income Statement. The Preferred Securities, which have an estimated fair value of $1.092 billion
and $1.087 billion at December 31, 2010 and 2009, respectively, are included in total Current Liabilities and
Redeemable Preferred and Common Securities of Subsidiaries on our Consolidated Balance Sheet.
The Preferred Securities are not traded in active markets. Accordingly, their fair values were calculated
using a floating rate pricing model that compares the stated spread to the fair value spread to determine the price
at which each of the financial instruments should trade. The model uses the following inputs to calculate fair
values: face value, current LIBOR rate, fair value spread, stated spread, maturity date and interest payment dates.
Neither the Third Party nor creditors of the subsidiary have recourse to our general credit. If our credit
ratings are downgraded below BBB- or Baa3, or if the Third Party elects to have its preferred securities redeemed
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