Kimberly-Clark Corporation recently reported third quarter 2014 results, updated its guidance for full-year 2014 adjusted earnings per share to take into account the pending spin-off of its health care business and initiated an organization restructuring.
Third quarter 2014 net sales of $5.4 billion increased 3 percent compared to the year-ago period. Organic sales rose 4 percent, including a 10 percent increase in K-C International. Organic sales exclude the impact of changes in foreign currency exchange rates and lower sales as a result of European strategic changes.
Diluted net income per share for the third quarter was $1.50 in 2014 and $1.42 in 2013.
Third quarter adjusted earnings per share were an all-time record $1.61 in 2014 compared to $1.44 in the year-ago period. Performance benefited from organic sales growth, cost savings and a lower share count, while comparisons were negatively impacted by input cost inflation, unfavorable foreign currency exchange rate effects, a higher adjusted effective tax rate and lower net income from equity companies. Adjusted earnings per share in both years exclude certain items described later in this press release.
Full-year adjusted earnings per share in 2014 are expected to be $5.93 to $6.03, assuming the spin-off of the company's health care business occurs at the end of October 2014. This guidance includes a 10 cent per share impact from the spin-off of the last two months of 2014 health care earnings. The previous target for adjusted earnings per share was $6.00 to $6.15 and assumed a full year of results for the health care business.
The company is also initiating a restructuring program to improve organization efficiency and offset the impact of stranded overhead costs resulting from the health care spin-off. The restructuring is expected to cost $130 to $160 million after-tax and generate cumulative pre-tax savings of $120 to $140 million.
Chairman and Chief Executive Officer Thomas J. Falk said, "We delivered another very good quarter of results, with solid organic sales growth, significant cost savings and margin improvement, and double-digit growth in adjusted earnings per share. We also made further progress with targeted growth initiatives, launched product innovations and supported our brands with increased advertising spending. We generated strong cash flow and continued to allocate capital in shareholder-friendly ways. I'm encouraged with our execution in a challenging environment. And our full-year guidance is consistent with our previous outlook, adjusting for the spin-off of our health care business."
Falk added, "The restructuring program we are undertaking will make our organization more efficient, allow us to offset the impact of stranded overhead costs from the spin-off and give us additional flexibility to invest for future growth. This effort is further evidence of how we manage our company with financial discipline and our commitment to generate attractive returns to shareholders."
Sales of $5.4 billion in the third quarter of 2014 were up more than 3 percent compared to the year-ago period. Organic sales rose 4 percent, with volumes and net selling prices each up 2 percent. Lower sales in conjunction with European strategic changes and changes in foreign currency exchange rates each reduced sales slightly.
Operating profit was $907 million in the third quarter of 2014 versus $807 million in 2013. Adjusted operating profit was $948 million in the third quarter of 2014, up 15 percent compared to $821 million in the year-ago period. Adjusted results in 2014 exclude $40 million of transaction and related costs for the spin-off of the health care business and $1 million of restructuring costs for European strategic changes. Adjusted results in 2013 exclude $14 million of restructuring costs for European strategic changes.
