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on Form 10-K
Kimberly-Clark Corporation
2014 Annual Report

Table of contents

  • Page 1
    2014 Annual Report on Form 10-K Kimberly-Clark Corporation

  • Page 2

  • Page 3
    ... market value of the registrant's common stock held by non-affiliates on June 30, 2014 (based on the most recent closing stock price on the New York Stock Exchange as of such date) was approximately $41.6 billion. As of February 11, 2015, there were 365,468,649 shares of Kimberly-Clark common stock...

  • Page 4
    ...4. Business...Risk Factors...Unresolved Staff Comments ...Properties...Legal Proceedings ...Mine Safety Disclosures...Executive Officers of the Registrant ... 1 3 7 7 8 8 8 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...

  • Page 5
    ... net sales and operating profit by segment on a continuing operations basis. Recent Developments Spin-off of Health Care Business On October 31, 2014 (the "Distribution Date"), we completed the spin-off of our health care business, creating a stand-alone, publicly traded health care company, Halyard...

  • Page 6
    ... and execute our global strategies to drive growth and profitability of our worldwide personal care, consumer tissue and KCP operations. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain...

  • Page 7
    ... plans, changes in legal requirements, including any requirements related to global climate change, or other factors. Employees In our worldwide consolidated operations, we had approximately 43,000 employees as of December 31, 2014. Available Information We make financial information, news releases...

  • Page 8
    ... growing our operations outside the U.S., especially in developing markets such as China, Latin America and Eastern Europe. More than half of our net sales are generated from markets outside the U.S. We and our equity companies have manufacturing facilities in 38 countries, with products sold in...

  • Page 9
    ... our operations, sales, payments to our vendors, employees, and others, and our ability to report financial and management information on a timely and accurate basis. There is no guarantee that our ongoing efforts to reduce costs will be successful. We continue to implement plans to improve our...

  • Page 10
    ...with Halyard, and we may not be able to realize all of the expected benefits of the program. Any failure to implement our restructuring plan in accordance with our expectations could adversely affect our business, results of operations, cash flows and financial condition. New or revised future legal...

  • Page 11
    ... executive offices located in the Dallas, Texas metropolitan area; four operating segment and geographic headquarters at two U.S. and two international locations; and four administrative centers at one U.S. and three international locations. 7 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 12
    ... as Executive Vice President and Chief Commercial Officer of Kraft Foods, Inc., a North American grocery manufacturing and processing conglomerate, from January 2012 to July 2012, as President of Sales, Customer Marketing and Logistics from 2010 KIMBERLY-CLARK CORPORATION - 2014 Annual Report 8

  • Page 13
    ...includes commercial tissue and wipers, and skin care, safety and Do-It-Yourself products. She joined Kimberly-Clark in 1988 and has held a number of positions with increasing responsibility within research and engineering, operations and marketing. 9 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 14
    ... business day of January, April, July and October. Kimberly-Clark common stock is listed on the New York Stock Exchange. The ticker symbol is KMB. As of February 11, 2015, we had 24,076 holders of record of our common stock. For information relating to securities authorized for issuance under equity...

  • Page 15
    ...FINANCIAL DATA Prior period amounts from the Consolidated Income Statements have been recast to present the results of the spun-off health care business as discontinued operations. Year Ended December 31 2014(a) 2013(b) 2012(c) 2011(d) 2010(e) Net Sales...$ Gross Profit ...Operating Profit...Share...

  • Page 16
    ... revenue, improving mix and reducing costs. We plan to continue to shift our mix to faster-growing, higher-margin wiping and safety segments within KCP. Beginning in 2015, we will describe our business outside North America in two groups - Developing and Emerging Markets ("D&E") and Developed...

  • Page 17
    ... consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2014 amounted to $3.3 billion. On October 31, 2014 (the "Distribution Date"), we completed the spin-off of our health care business, creating a standalone, publicly traded health care company, Halyard Health...

  • Page 18
    ...2013, and 2013 results to 2012. Results By Business Segment Year Ended December 31 2014 2013 Change 2014 vs. 2013 2012 Change 2013 vs. 2012 NET SALES Personal Care ...$ Consumer Tissue...K-C Professional ...Corporate & Other ...TOTAL NET SALES...$ OPERATING PROFIT Personal Care ...$ Consumer Tissue...

  • Page 19
    ...2014 2013 Change 2014 vs. 2013 2012 Change 2013 vs. 2012 NET SALES North America...$ Europe ...Asia, Latin America and other ...Intergeographic sales...TOTAL NET SALES...$ OPERATING PROFIT North America...$ Europe ...Asia, Latin America and other ...Corporate & Other(a)...Other (income) and expense...

  • Page 20
    OPERATING PROFIT Total 2014 versus 2013 Volume Net Price Change Due To Input Costs(a) Cost Savings Currency Translation Other(b) Consolidated ...Personal Care ...Consumer Tissue...K-C Professional...2013 versus 2012 (13.2) 6.2 7.5 (0.2) 5 5 1 5 13 15 10 3 (8) (9) (5) (8) 11 12 10 5 (3) (3) -...

  • Page 21
    ... net sales by 1 percent, and lower sales in conjunction with European strategic changes and pulp and tissue restructuring actions reduced net sales by a combined 1 percent. Operating profit of $1,062 increased 7 percent. The comparison benefited from higher net selling prices and cost savings...

  • Page 22
    ... the operating profit comparison. The effective tax rate was 31.4 percent in 2013 compared to 31.3 percent in 2012. Kimberly-Clark's share of net income of equity companies was $205 in 2013 and $177 in 2012. At KCM, results benefited from net sales growth, increased operating profit margin and...

  • Page 23
    ..., we exited certain non-strategic products, primarily non-branded offerings, and transferred some production to lower-cost facilities in order to improve overall profitability and returns. The actions were substantially complete at December 31, 19 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 24
    ...of our health care business. Liquidity and Capital Resources Cash Provided by Operations Cash provided by operations was $2.8 billion in 2014 compared to $3.0 billion in 2013. The decrease was driven by higher tax payments and transaction costs for the health care spin-off, partially offset by lower...

  • Page 25
    ...time pursuant to publicly announced share repurchase programs. During 2014, we repurchased 18.0 million shares of our common stock at a cost of $2.0 billion through a broker in the open market, including the impact of approximately $600 from the spin-off of our health care business. In 2015, we plan...

  • Page 26
    ... the promotional programs Generally, the estimates for consumer coupon costs are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories. Employee Postretirement Benefits Pension Plans We...

  • Page 27
    ...• Pension expense for defined benefit pension plans is estimated to approximate $100 in 2015. Pension expense beyond 2015 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered employees in...

  • Page 28
    ...of new accounting standards and their anticipated effects on our Consolidated Financial Statements. Business Outlook In 2015, we plan to continue to execute our Global Business Plan strategies, which include a focus on targeted growth initiatives, innovation and brand building, cost savings programs...

  • Page 29
    ... to our defined benefit pension plans and to increase our quarterly dividend mid-single digits effective April 2015, subject to approval by the Board of Directors. Charges related to the 2014 organization restructuring are expected to be $30 to $50 after tax. Information Concerning Forward-Looking...

  • Page 30
    ..., we are subject to price risk for utilities and manufacturing inputs, which are used in our manufacturing operations. Derivative instruments are used in accordance with our risk management policy to hedge a limited portion of the price risk. KIMBERLY-CLARK CORPORATION - 2014 Annual Report 26

  • Page 31
    ... FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Year Ended December 31 (Millions of dollars, except per share amounts) 2014 2013 2012 Net Sales ...Cost of products sold...Gross Profit ...Marketing, research and general expenses...

  • Page 32
    ... Attributable to Kimberly-Clark Corporation ... $ 1,595 (835) (275) 20 (1,090) 505 (57) $ 2,221 (494) 302 17 (175) 2,046 (87) $ 1,828 215 (377) (16) (178) 1,650 (93) $ 448 $ 1,959 $ 1,557 See Notes to Consolidated Financial Statements. KIMBERLY-CLARK CORPORATION - 2014 Annual Report 28

  • Page 33
    ... Equity Kimberly-Clark Corporation Preferred stock-no par value-authorized 20.0 million shares, none issued ...Common stock-$1.25 par value-authorized 1.2 billion shares; issued 428.6 million shares at December 31, 2014 and 2013 ...Additional paid-in capital ...Common stock held in treasury, at cost...

  • Page 34
    ......Employee postretirement benefits .. Other...Stock-based awards exercised or vested . Income tax benefits on stock-based compensation...Shares repurchased ...Recognition of stock-based compensation...Dividends declared ...Spin-off of health care business ...Other...Balance at December 31, 2014...

  • Page 35
    ... ...Stock-based compensation ...Deferred income taxes...Net (gains) losses on asset dispositions...Equity companies' earnings (in excess of) less than dividends paid ...(Increase) decrease in operating working capital ...Postretirement benefits ...Charge for Venezuelan balance sheet remeasurement...

  • Page 36
    ...net sales and operating profit by segment on a continuing operations basis. On October 31, 2014, we completed the spin-off of our health care business, creating a stand-alone, publicly traded health care company, Halyard Health, Inc. ("Halyard"), by distributing 100 percent of the outstanding shares...

  • Page 37
    ...in sales revenue. Estimates of trade promotion liabilities for promotional program costs incurred, but unpaid, are generally based on estimates of the quantity of customer sales, timing of promotional activities and forecasted costs for activities within the promotional programs. Advertising Expense...

  • Page 38
    devaluation, we recorded a $26 after-tax charge ($36 pre-tax) related to the remeasurement of the local currency-denominated balance sheet to the new exchange rate in the quarter ended March 31, 2013. Prior to this devaluation, we used the Central Bank SITME rate of 5.4 bolivars per U.S. dollar to ...

  • Page 39
    ... costs after the spin-off. These include costs related to supply chain, finance, legal, information technology, human resources, compliance, shared services, insurance, employee benefits and incentives, and stock-based compensation. On a pre-tax basis, through the date of the spin-off, these costs...

  • Page 40
    ... 2014 related to the restructuring were not material. On a geographic basis, $47 of the charges were recorded in North America, $28 in Europe, and $58 in our international operations in Asia, Latin America, the Middle East, Eastern Europe and Africa. KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 41
    ...consumer tissue, in certain markets. The changes primarily affected our consumer businesses, with a modest impact on K-C Professional ("KCP"). The restructuring actions commenced in 2012 and were completed by December 31, 2014. Restructuring actions related to the strategic changes involved the sale...

  • Page 42
    ... date and interest or dividend payment dates. Additionally, the fair value of the remaining redeemable securities was based on various inputs, including an independent third-party appraisal, adjusted for current market conditions. (b) (c) (d) (e) KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 43
    ... are as follows: Personal Care Consumer Tissue K-C Professional Health Care Business Total Balance at December 31, 2012...$ Acquisitions...Currency and other ...Balance at December 31, 2013...Currency and other ...Spin-off of health care business ...Balance at December 31, 2014...$ 764 $ 6 (86...

  • Page 44
    ... time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units on the same date and at the same KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 45
    ... paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings. In connection with the spin-off of our health care business, under the provisions of our existing Plans, employee stock options, time-vested restricted share units and...

  • Page 46
    ...Based Restricted Share Units WeightedAverage Grant-Date Fair Value Other Stock-Based Awards Shares (in thousands) Shares (in thousands) Nonvested at January 1, 2014...Granted ...Vested...Forfeited...Dividend equivalent for spin-off of health care business ...Nonvested at December 31, 2014... 257...

  • Page 47
    ... financial information about postretirement plans, excluding defined contribution retirement plans, is presented below: Pension Benefits 2014 2013 2014 Other Benefits 2013 Year Ended December 31 Change in Benefit Obligation Benefit obligation at beginning of year ...$ Service cost...Interest cost...

  • Page 48
    ...Weighted-Average Assumptions Used to Determine Net Cost for Years Ended December 31 Pension Benefits Projected 2015 2014 2013 2012 2014 Other Benefits 2013 2012 Discount rate ...Expected long-term return on plan assets...Rate of compensation increase... 3.83 % 5.21 % 2.63 % 4.66% 5.98% 2.67% 4.04...

  • Page 49
    ... on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the...

  • Page 50
    ... concentrations of equity or debt securities in any single issuer or industry. The fair value of other plan assets was determined based on an evaluation of various factors. No other level 3 transfers (in or out) were made in 2014 and 2013. KIMBERLY-CLARK CORPORATION - 2014 Annual Report 46

  • Page 51
    ... plans balances as of December 31, 2014 is $2,016 and $54 of unrecognized net actuarial loss and unrecognized net prior service credit, respectively, of which $116 and $10 pre-tax, respectively, are expected to be recognized as a component of net periodic benefit cost in 2015. 47 KIMBERLY-CLARK...

  • Page 52
    ...(2) 12 (22) (20) - (1) (21) 5 (16) - (193) Spin-off of health care business ...Change in AOCI ...$ Amounts are reclassified from AOCI into cost of products sold, marketing, research and general expenses, interest expense or other (income) and expense, net, as applicable, in the Consolidated Income...

  • Page 53
    ... risk is managed using a portfolio of variable- and fixed-rate debt composed of short- and long-term instruments. Interest rate swap contracts may be used to facilitate the maintenance of the desired ratio of variable- and fixed-rate debt and are 49 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 54
    ... non-designated derivatives is substantially neutralized by the transactional gains and losses recorded on the underlying assets and liabilities. At December 31, 2014, the notional amount of these undesignated derivative instruments was $2.6 billion. KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 55
    ... in subsidiaries ...Other...Total deferred tax liabilities...Net deferred tax assets (liabilities)...$ 883 538 77 590 2,088 (215) 1,873 $ 728 604 104 516 1,952 (197) 1,755 260 1,162 223 339 1,984 (111) $ 259 1,244 205 396 2,104 (349) 51 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 56
    ...amounts recorded as unrecognized tax benefits at December 31, 2014, $266 would reduce our effective tax rate if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2014, 2013 and 2012, the net cost in...

  • Page 57
    ... reportable global business segments: Personal Care, Consumer Tissue and KCP. The reportable segments were determined in accordance with how our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product...

  • Page 58
    ... by Business Segment Year Ended December 31 2014 2013 2012 NET SALES(a) Personal Care ...$ Consumer Tissue...K-C Professional...Corporate & Other ...TOTAL NET SALES...$ OPERATING PROFIT(b) Personal Care ...$ Consumer Tissue...K-C Professional...Corporate & Other ...Other (income) and expense, net...

  • Page 59
    ... balance sheet, respectively. Personal Care Consumer Tissue K-C Professional Corporate & Other Ongoing Operations Health Care Business (Spun-off) Consolidated Total Depreciation and Amortization 2014 ...$ 2013...2012...Assets 2014 ...2013...2012...Capital Spending 2014 ...2013...2012...Sales...

  • Page 60
    ... of the spin-off of our health care business on the Consolidated Balance Sheet. December 31 Summary of Accounts Receivable, Net 2014 2013 From customers ...$ Other ...Less allowance for doubtful accounts and sales discounts...Total ...$ December 31 2014 Summary of Inventories by Major Class LIFO...

  • Page 61
    ...Flow Statement Data 326 415 258 330 113 532 1,974 $ 355 471 358 336 44 496 $ 2,060 Year Ended December 31 Summary of Cash Flow Effects of Decrease (Increase) in Operating Working Capital 2014 2013 2012 Accounts receivable ...$ Inventories...Trade accounts payable ...Accrued expenses...Accrued...

  • Page 62
    ... of the Treadway Commission and our report dated February 18, 2015 expressed an unqualified opinion on the Corporation's internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Dallas, Texas February 18, 2015 KIMBERLY-CLARK CORPORATION - 2014 Annual Report 58

  • Page 63
    ...also reviews with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of our internal control over financial reporting, including compliance matters related to our code of conduct, and the results of internal and external audits. The Audit...

  • Page 64
    ... of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. /s/ Mark A. Buthman Mark A. Buthman Senior Vice President and Chief Financial Officer KIMBERLY-CLARK CORPORATION - 2014 Annual Report 60

  • Page 65
    ... our report dated February 18, 2015 expressed an unqualified opinion on those financial statements and financial statement schedule. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Dallas, Texas February 18, 2015 ITEM 9B. OTHER INFORMATION None. 61 KIMBERLY-CLARK CORPORATION - 2014 Annual Report

  • Page 66
    ... retirement from or any other termination of service from the Board, a share of Kimberly-Clark common stock is issued for each restricted share unit. Column (b) does not take these awards into account because they do not have an exercise price. (2) KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 67
    ... information in the sections of the 2015 Proxy Statement captioned "Principal Accounting Firm Fees" and "Audit Committee Approval of Audit and Non-Audit Services" under "Proposal 2. Ratification of Auditors" is incorporated in this Item 14 by reference. 63 KIMBERLY-CLARK CORPORATION - 2014 Annual...

  • Page 68
    ... quarter ended March 31, 2008.* Executive Officer Achievement Award Program as amended November 12, 2008, incorporated by reference to Exhibit No. (10)d of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2008.* Deferred Compensation Plan, as amended and restated, dated...

  • Page 69
    ...No. (10)p of the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.* Summary of Financial Counseling Program for Kimberly-Clark Corporation Executives, dated November 12, 2008, incorporated by reference to Exhibit No. (10)t of the Corporation's Annual Report on Form 10...

  • Page 70
    ... Label Linkbase Document Exhibit No. (101).PRE XBRL Taxonomy Extension Presentation Linkbase Document * A management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this Annual Report on Form 10-K. KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 71
    ... the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KIMBERLY-CLARK CORPORATION February 18, 2015 By: /s/ Mark A. Buthman Mark A. Buthman Senior Vice President and Chief Financial Officer Pursuant...

  • Page 72
    ... 2012 Deferred taxes Valuation allowance...$ (a) 197 $ 30 $ - $ 12 $ 215 215 $ (11) $ - $ 7 $ 197 229 $ (18) $ - $ (4) $ 215 Represents the net currency effects of translating valuation allowances at current rates of exchange. KIMBERLY-CLARK CORPORATION - 2014 Annual Report...

  • Page 73
    ... Returns Year Ended December 31 Company Name / Index Kimberly-Clark Corporation ...S&P 500 Index ...S&P 500 Consumer Staples Index...2009 $100 100 100 2010 $103 115 114 2011 $125 117 129 2012 $148 136 143 2013 $189 179 180 2014 $225 204 209 Investor Relations Securities analysts, portfolio managers...

  • Page 74
    ... business day of January, April, July and October. The Direct Stock Purchase and Dividend Reinvestment Plan of Computershare Investor Services is available generally to investors, including Kimberly-Clark employees and stockholders. This Plan makes it possible for investors to have their dividends...

  • Page 75
    ... and Chief Executive Officer Kimberly-Clark Corporation Fabian T. Garcia Management Development and Compensation Committee Nominating and Corporate Governance Committee Chief Operating Officer, Global Innovation and Growth, Europe & Hill's Pet Nutrition Colgate-Palmolive Company Mae C. Jemison...

  • Page 76
    Kimberly-Clark Corporation World Headquarters P.O. Box 619100 Dallas, Texas 75261-9100 Toll-free investor information: 800.639.1352 www.kimberly-clark.com