Kimberly-Clark Announces Preliminary Second Quarter 2008 Results

2Q Net Sales Increased Approximately 11 Percent to $5.0 Billion in 2008; GAAP-Basis EPS Were $0.99 vs. $1.00 in 2007

Adjusted EPS Declined 1 Percent to $1.03, Below Previous Guidance for the Quarter

Company Updates Earnings Guidance for 2008 in Light of Significant Increase in Cost Inflation; Now Expects Adjusted EPS of $4.20 to $4.30 Compared with Previous Range of $4.45 to $4.60

DALLAS, July 14 /PRNewswire-FirstCall/ -- Kimberly-Clark Corporation today reported that net sales in the second quarter of 2008, based on preliminary figures, advanced 11 percent to $5.0 billion. Sales growth was highlighted by double-digit increases in the Personal Care and K-C Professional businesses, with particular strength in developing and emerging markets. Overall, organic sales growth is estimated to be about 7 percent, driven primarily by increased sales volumes and higher net selling prices.

Diluted net income per share for the quarter is estimated to be $0.99 compared with $1.00 in the prior year. Preliminary adjusted earnings were $1.03 per share versus $1.04 per share in the second quarter of 2007 and below the company's previous guidance range of $1.08 to $1.11 per share. Although top-line growth and savings from cost reduction programs benefited year-over-year earnings comparisons, these factors were more than offset by a significant increase in cost inflation and a planned higher investment in strategic marketing of nearly $25 million. Full details of the quarterly results will be announced on July 24, 2008.

The company noted that the shortfall in adjusted earnings per share versus its previous guidance was driven primarily by the rapid escalation in costs that occurred during the second quarter. Inflation was approximately $50 million higher than estimated heading into the quarter, with the greatest increases in energy costs, particularly natural gas, oil-based materials and distribution costs. Margins were adversely impacted across all businesses.

Adjusted earnings per share excludes charges for strategic cost reductions to streamline the company's operations in both years and certain incremental implementation costs related to the strategic cost reduction plan in 2007, as well as an after-tax extraordinary loss related to the restructuring of certain contractual arrangements in the second quarter of 2008. Additional detail on these items and further information about adjusted earnings per share and why the company uses this non-GAAP financial measure is provided later in this news release.

Chairman and Chief Executive Officer Thomas J. Falk said, "While I'm encouraged by our continued strong top-line growth in the quarter, I'm disappointed that the dramatic acceleration in inflation over the last quarter has interrupted our progress in delivering on our bottom-line commitments. Given second quarter results and our planning assumption that raw material and energy costs will remain at elevated levels, we anticipate our margins will remain under pressure in the near-term.

"In this environment, we are intent on improving revenue realization in order to offset recent commodity cost increases and restore profitability to acceptable levels. That's why we just raised prices again in K-C Professional in the U.S. and will shortly be implementing our second price increase of the year across most of our U.S. consumer tissue and personal care categories. We have also implemented or announced price increases in a number of other markets around the world. Moreover, further pricing actions may be warranted by the cost environment.

"In the meantime, we will continue to focus on executing our Global Business Plan strategies to drive sustainable growth and long-term competitive advantage. I am convinced that we are doing the right things for the long-term health of our businesses and that we are effectively managing those factors which we can control -- generating top-line growth; driving costs out of the system; building our brands; improving our capabilities in marketing, innovation and customer development; and deploying our cash in shareholder-friendly ways."

Outlook

The company updated key planning and guidance assumptions for 2008, as follows:

-- Organic sales growth of 5 to 7 percent. This assumes implementation of recently announced price increases in the U.S.

-- Net sales growth of 8 to 10 percent. Given current rates of exchange, currency should benefit sales for the full year by approximately 3 percent.

-- Inflation of as much as $900 million, more than double the company's original estimate. This reflects pricing for benchmark northern softwood pulp of $890 to $910 per metric ton in the second half of the year. It also assumes that oil prices and natural gas prices will be similar to current levels over the balance of the year, in ranges of $135 to $145 per barrel and $12 to $13 per mmbtu, respectively.

-- Capital investments of $850 to $950 million that will help support future sales and earnings growth. This is consistent with the company's original plan for the year.