Kimberly-Clark Accelerates Implementation of the FORCE

By Steven Ralston

Kimberly-Clark Corporation (KMB) (Analyst Report) announced plans to reduce its salaried workforce by approximately 1,600 positions (or 3%) by the end of 2009, which management believes will yield annualized savings of $150 million.

The organizational changes will require charges of $140 million to $150 million (or between $0.24 and $0.26 per share), mostly in the second quarter of 2009 (about $0.19 per share). Management expects to achieve $0.10 per share in savings during the second half of 2009.

The reduction of the workforce will not only further streamline the company, but also accelerate the implementation of the company's other cost reduction programs, namely the FORCE (Focused on Reducing Costs Everywhere) program and the Strategic Cost Reduction Plan, which target savings from sourcing and supply chain activities.

The workforce reductions will primarily affect salaried and non-production jobs. Management does not plan to close any manufacturing plants as part of the workforce reduction.

The effects of the reduction in the workforce were not included in management's previous earnings guidance, which was issued concurrent with the last earnings release. The guidance was a range of $4.00 to $4.20 per diluted share. In addition, management believed that earnings per share in the first half of the year were likely to be down versus 2008 with positive year-over-year quarterly comparisons in the second half of the year. Management will update earnings guidance on Jul 23 when second-quarter earnings are announced.

Dallas-based Kimberly-Clark sells paper-based consumer and medical products in more than 150 countries and holds the No. 1 or No. 2 position in terms of market share in more than 80 countries. The company operates through 4 business segments: Personal Care, Consumer Tissue, K-C Professional, and Health Care.

The Personal Care segment produces diapers (Huggies, Pull-Ups, and GoodNites), swim pants (Little Swimmers), and adult/feminine hygiene products (Kotex, Lightdays, Poise, and Depend) and accounted for 43% of total revenues in 2008.

The Consumer Tissue segment, which accounted for 35% of revenues, manufactures facial and bathroom tissues (Kleenex, Cottonelle, and Scott), paper towels, napkins, wet wipes, and other products.

Accounting for 16% of revenues, the K-C Professional & Other segment manufactures and markets facial and bathroom tissue, paper towels, napkins, wipers and a range of safety products for the away-from-home marketplace under the brand names of Kleenex, Scott, WypAll, Kimtech, KleenGuard and Kimcare.

The Health Care segment (5% of revenues) manufactures and markets disposable health care products, such as surgical gowns, drapes, infection control products, sterilization wrap, face masks, exam gloves, respiratory items and other disposable medical products.