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KIMBERLY CLARK CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) Introduction This management's discussion and analysis of financial condition and results of operations is intended to provide investors with an understanding of our recent performance, financial condition and prospects. The following will be discussed and analyzed: • Overview of Third Quarter 2014 Results • Status of the Health Care Business Spin-off • Results of Operations and Related Information • Liquidity and Capital Resources • Legal Matters • Business Outlook Overview of Third Quarter 2014 Results • Net sales increased more than 3 percent compared to the year-ago period due to increases in sales volumes and net selling prices. • Charges associated with the spin-off of the health care business and related matters were $41 after tax. See Note 2 to the Consolidated Financial Statements for additional information. • Operating profit and net income attributable to Kimberly-Clark Corporation increased 12 percent and 3 percent, respectively. • Diluted earnings per share were $1.50 versus $1.42 in the prior year. Status of the Health Care Business Spin-off In November 2013, we announced that our Board of Directors authorized management to pursue a potential tax-free spin-off of our health care business. The spin-off will create a stand-alone, publicly traded health care company with approximately $1.7 billion in annual net sales, focused on the sale of surgical and infection prevention products for the operating room and other medical supplies, and medical devices focused on pain management, respiratory and digestive health. A Form 10 registration statement was filed in May 2014 with the Securities and Exchange Commission (the "SEC") to register our health care business as an independent stand-alone public company named Halyard Health, Inc. ("Halyard"). In September 2014, our Board of Directors authorized its executive committee ("Executive Committee") to approve the final terms and conditions of the distribution. On October 6, 2014, the Executive Committee approved the distribution of all of the issued and outstanding shares of Halyard common stock on the basis of one share of Halyard common stock for every eight shares of Kimberly-Clark common stock held as of the close of business on October 23, 2014, the record date for the distribution. The Form 10 registration statement, as amended, was deemed effective by the SEC on October 17, 2014. We expect that the spin-off will be completed at the end of the day on October 31, 2014, subject to market, regulatory and other conditions. Halyard will fund a cash distribution to us equal to the estimated amount of all of Halyard's available cash on the distribution date in excess of the minimum amount to be retained by Halyard. Such minimum amount will be equal to $40 plus the estimated net amount of certain intercompany assets and liabilities on the distribution date that are to be retained by us plus approximately $1 associated with certain retention bonus obligations to be transferred to Halyard. The amount of funds resulting from the intercompany settlements will be determined on or about the date of the distribution, although the exact amount will depend on the amount of the cash distribution and the intercompany transactions. We expect to use the proceeds of this cash distribution to make open-market repurchases of our shares of common stock. After the spin-off, the divested health care business will be presented as discontinued operations, which will exclude overhead costs previously allocated to health care that will remain part of Kimberly-Clark after the spin-off, on our Consolidated Income Statement for all periods presented. The health care business' balance sheet, other comprehensive income and cash flows will be included within our Consolidated Balance Sheet, Consolidated Statement of Stockholders' Equity, Consolidated Statement of Comprehensive Income and Consolidated Cash Flow Statement through October 31, 2014. 17 -------------------------------------------------------------------------------- Results of Operations and Related Information This section presents a discussion and analysis of our third quarter 2014 net sales, operating profit and other information relevant to an understanding of the results of operations. Results By Business Segment Nine Months Ended Three Months Ended September 30 September 30 2014 2013 Change 2014 2013 Change NET SALES Personal Care $ 2,475 $ 2,383 +3.9 % $ 7,299 $ 7,170 +1.8 % Consumer Tissue 1,697 1,626 +4.4 % 5,024 4,969 +1.1 % K-C Professional 873 843 +3.6 % 2,531 2,477 +2.2 % Health Care 392 403 -2.7 % 1,186 1,201 -1.2 % Corporate & Other 5 7 N.M. 23 30 N.M. TOTAL NET SALES $ 5,442 $ 5,262 +3.4 % $ 16,063 $ 15,847 +1.4 % OPERATING PROFIT Personal Care $ 483 $ 427 +13.1 % $ 1,393 $ 1,300 +7.2 % Consumer Tissue 285 233 +22.3 % 782 713 +9.7 % K-C Professional 165 155 +6.5 % 455 459 -0.9 % Health Care 52 70 -25.7 % 187 168 +11.3 % Corporate & Other(a) (95 ) (70 ) N.M. (296 ) (242 ) N.M. Other (income) and expense, net(b) (17 ) 8 N.M. 27 12 +125.0 % TOTAL OPERATING PROFIT $ 907 $ 807 +12.4 % $ 2,494 $ 2,386 +4.5 % N.M. - Not Meaningful Results By Geography Nine Months Ended Three Months Ended September 30 September 30 2014 2013 Change 2014 2013 Change NET SALES North America $ 2,717 $ 2,727 -0.4 % $ 8,105 $ 8,104 - Europe 713 693 +2.9 % 2,171 2,250 -3.5 % Asia, Latin America and other 2,230 2,054 +8.6 % 6,438 6,146 +4.8 % Intergeographic sales (218 ) (212 ) N.M. (651 ) (653 ) N.M. TOTAL NET SALES $ 5,442 $ 5,262 +3.4 % $ 16,063 $ 15,847 +1.4 % OPERATING PROFIT North America $ 592 $ 530 +11.7 % $ 1,656 $ 1,618 +2.3 % Europe 62 63 -1.6 % 211 185 +14.1 % Asia, Latin America and other 331 292 +13.4 % 950 837 +13.5 % Corporate & Other(a) (95 ) (70 ) N.M. (296 ) (242 ) N.M. Other (income) and expense, net(b) (17 ) 8 N.M. 27 12 +125.0 % TOTAL OPERATING PROFIT $ 907 $ 807 +12.4 % $ 2,494 $ 2,386 +4.5 % (a) Corporate & Other includes charges related to the European strategic changes of $1 and $11 for the three months ended September 30, 2014 and 2013, respectively, and $13 and $64 for the nine months ended September 30, 2014 and 2013, respectively. In addition, Corporate & Other includes $40 and $115 for charges related to the spin-off of our health care business for the three and nine months ended September 30, 2014, respectively. (b) For the nine months ended September 30, 2014, other (income) and expense, net includes a $39 charge related to a regulatory dispute in the Middle East and for the nine months ended September 30, 2013, includes a $36 charge related to the devaluation of the Venezuelan bolivar. 18-------------------------------------------------------------------------------- Percentage Change 2014 Versus 2013 NET SALES Changes Due To Organic Restructuring Third Quarter Total Volume Impact(a) Net Price Mix/Other(b) Currency Consolidated 3.4 2 - 2 (1) - Personal Care 3.9 2 - 3 - (1) Consumer Tissue 4.4 3 - 1 (1) 1 K-C Professional 3.6 3 - - - 1 Health Care (2.7) - - (3) - - Year-to-Date Consolidated 1.4 3 (1) 2 (1) (2) Personal Care 1.8 4 (1) 2 - (3) Consumer Tissue 1.1 1 (2) 2 - - K-C Professional 2.2 2 - 1 - (1) Health Care (1.2) 1 - (2) - - (a) Lower sales related to the European strategic changes and the 2011 and 2012 pulp and tissue restructuring actions. (b) Mix/Other includes rounding. OPERATING PROFIT Changes Due To Input Currency Third Quarter Total Volume Net Price Costs(a) Cost Savings Translation Other(b) Consolidated 12.4 5 11 (7) 12 - (9) Personal Care 13.1 4 18 (8) 10 - (11) Consumer Tissue 22.3 8 9 (3) 18 2 (12) K-C Professional 6.5 5 1 (10) 6 - 4 Health Care (25.7) (3) (15) (4) 6 - (10) Year-to-Date Consolidated 4.5 5 11 (8) 10 (2) (11) Personal Care 7.2 7 13 (8) 11 (2) (14) Consumer Tissue 9.7 2 13 (5) 10 - (10) K-C Professional (0.9) 4 4 (8) 5 (3) (3) Health Care 11.3 2 (12) 1 7 (1) 14 (a) Includes inflation/deflation in raw materials, energy and distribution costs. (b) Other includes the impact of changes in marketing, research and general expenses and manufacturing costs not separately listed in the table. In addition, consolidated includes the impact of the charges in 2014 and 2013 related to the European strategic changes and in 2014 related to the spin-off of the health care business. Consolidated year-to-date also includes the impact of charges related to a regulatory dispute in the Middle East in the first quarter of 2014 and the devaluation of the Venezuelan bolivar in the first quarter of 2013. Commentary - Third Quarter of 2014 Compared to Third Quarter of 2013 Consolidated Net 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 volumes and net selling prices each increased 2 percent. Lower sales in conjunction with European strategic changes and changes in foreign currency exchange rates each reduced net sales slightly. Operating profit was $907 in the third quarter of 2014 versus $807 in 2013. Results in 2014 include $40 of transaction and related charges for the spin-off of the health care business. Results in 2013 include $14 of restructuring costs for European strategic changes, versus $1 in 2014. 19 -------------------------------------------------------------------------------- The year-over-year operating profit comparison benefited from organic sales volume growth, higher net selling prices and $100 in cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program. Total marketing, research and general expenses were down slightly versus prior-year levels, despite a $10 increase in advertising spending. Input costs increased $55 overall, with $35 of increased costs for raw materials other than fiber, $10 of higher fiber costs and $10 of increased distribution costs. Foreign currency translation effects had minimal overall impact on operating profit, while currency transaction effects negatively impacted the operating profit comparison, primarily in Eastern Europe and Latin America. Other (income) and expense, net was income of $17 in the third quarter of 2014, including a gain on the sale of certain non-core assets, compared to $8 of expense in the year-ago period. The third quarter effective tax rate was 34.5 percent in 2014 compared to 30.3 percent in 2013. The increase in the effective tax rate was driven by various tax matters, most notably costs in preparation for the spin-off of the health care business. Kimberly-Clark's share of net income of equity companies in the third quarter was $31 in 2014 and $49 in 2013. At Kimberly-Clark de Mexico, S.A.B., results were negatively impacted by lower net sales and input cost increases, partially offset by cost savings. Personal Care Segment Third quarter net sales of $2.5 billion increased 4 percent. Net selling prices rose 3 percent and organic sales volumes increased 2 percent. Currency rates were unfavorable by 1 percent and lower sales as a result of European strategic changes reduced net sales slightly. Third quarter operating profit of $483 increased 13 percent. The comparison benefited from organic sales volume growth, higher net selling prices and cost savings, partially offset by input cost inflation and unfavorable effects from changes in currency rates. Net sales in North America decreased 1 percent. Volumes were down more than 1 percent while net selling prices were up about 1 percent. Adult care volumes increased double-digits, including benefits from innovation and promotion shipments, and Huggies baby wipes volumes rose mid-single digits. Child care volumes were similar to year-ago levels, as benefits from the launch of new GoodNites youth pants were offset by lower Pull-Ups training pants volumes. Huggies diaper volumes were off low-double digits compared to mid-single digit growth in the year-ago period and were impacted by market share declines and competitive promotional activity. Net sales in K-C International increased 9 percent despite a 3 point negative impact from changes in currency rates. Volumes and net selling prices each improved 6 percent. The volume increase was driven by gains in Brazil, China, Russia/Eastern Europe, South Africa, South Korea and Vietnam. The higher net selling prices were driven by increases in Latin America and Eastern Europe in response to weaker currency rates and cost inflation. Net sales in Europe decreased 5 percent, including a 6 point negative impact from lower sales in conjunction with European strategic changes. Organic sales volumes and net selling prices were each down 2 percent, while currency rates were favorable by 5 percent. Consumer Tissue Segment Third quarter net sales of $1.7 billion increased 4 percent. Organic sales volumes increased 3 percent and net selling prices rose 1 percent, while product mix was off 1 percent. Currency rates were favorable by 1 percent. Third quarter operating profit of $285 increased 22 percent. The comparison benefited from organic sales volume growth, higher net selling prices and cost savings, partially offset by input cost inflation. Net sales in North America were up 3 percent. Volumes increased approximately 7 percent, while changes in product mix reduced net sales 2 percent and net selling prices were off 1 percent. The volume growth included benefits from market share gains, promotion activity and the launch of Viva Vantage paper towels earlier this year. Net sales in K-C International increased 6 percent, including a 1 point benefit from changes in currency rates. Net selling prices increased 7 percent, while volumes and product mix were each off 1 percent. The higher net selling prices were driven by increases in Latin America in response to unfavorable currency rates and cost inflation. Net sales in Europe increased 5 percent. Currency rates were favorable by 5 percent, while lower sales in conjunction with European strategic changes reduced net sales 1 percent. Organic sales volumes rose 2 percent, driven by increases on bathroom tissue, while net selling prices were off 1 percent. 20 -------------------------------------------------------------------------------- K-C Professional ("KCP") Segment Third quarter net sales of $0.9 billion increased 4 percent. Organic sales volumes rose 3 percent and changes in currency rates increased net sales 1 percent. Third quarter operating profit of $165 increased 6 percent. The comparison benefited from organic sales volume growth, cost savings and lower manufacturing-related costs, partially offset by input cost inflation. Net sales in North America decreased 3 percent, driven by lower net selling prices. Overall organic sales volumes were even with year-ago levels, as increases in safety products and wipers were offset by declines in washroom and other product categories. Net sales in K-C International increased 14 percent. Organic sales volumes rose 7 percent, net selling prices improved 6 percent and product mix advanced 1 percent. The growth was driven by increases in Latin America, along with solid performance in Asia. Net sales in Europe were up 6 percent, including a 4 point benefit from currency rates. Volumes increased 3 percent, while net selling prices were off 1 percent. Health Care Segment Third quarter net sales of $0.4 billion decreased 3 percent, primarily due to lower net selling prices. Surgical and infection prevention and medical device volumes were both similar to year-ago levels. Third quarter operating profit of $52 decreased 26 percent, driven by lower net sales, unfavorable effects from changes in currency rates and cost inflation. Commentary - First Nine Months of 2014 Compared to First Nine Months of 2013 For the first nine months of 2014, net sales of $16.1 billion increased 1 percent compared to the year-ago period. Organic sales volumes increased 3 percent, and net selling prices rose 2 percent, partially offset by slightly unfavorable product mix. Foreign currency exchange rates were unfavorable by 2 percent and lower sales in conjunction with European strategic changes and pulp and tissue restructuring actions reduced net sales by 1 percent. Year-to-date operating profit was $2,494 in 2014 versus $2,386 in 2013. Operating profit comparisons benefited from organic sales volume growth, higher net selling prices, FORCE cost savings of $245 and $25 of savings from pulp and tissue restructuring actions. Total marketing, research and general expenses were down versus prior-year levels, driven primarily by lower administrative costs. Input costs were $180 higher overall versus 2013. Foreign currency translation effects reduced operating profit by $45 and currency transaction effects also negatively impacted the operating profit comparison. Results in 2014 include transaction and related costs for the spin-off of our health care business and restructuring costs for European strategic changes. Results in 2013 include restructuring costs for European strategic changes. Other (income) and expense, net was $27 of expense in the first nine months of 2014 and $12 of expense in the prior year. 2014 results were driven by foreign currency transaction losses and a non-deductible charge of $39 related to an adverse court ruling regarding the treatment of capital contributions in prior years to a majority-owned affiliate in the Middle East, partially offset by gains on the sales of certain non-core assets. The year-ago results included the $36 charge related to the devaluation of the Venezuelan bolivar, partially offset by gains on the sales of certain non-core assets. Through nine months, diluted net income per share was $4.25 in 2014 and $4.13 in 2013. The increase was primarily due to higher operating profit and a lower share count, partially offset by lower equity income. The year-to-date effective tax rate was 32.7 percent in 2014 compared to 31.3 percent in 2013. European Strategic Changes In October 2012, we initiated strategic changes to our Western and Central European businesses, including the exit of the diaper category, with the exception of the Italian market, divestiture or exit of some lower-margin businesses in certain markets, primarily in the consumer tissue segment, and streamlining of our manufacturing footprint and administrative organization. The impacted businesses previously generated annual net sales of approximately $0.5 billion and negligible operating profit. Total related restructuring costs will be incurred through 2014. As a result of the restructuring activities, net sales for the nine months ended September 30, 2014 were decreased by $150 compared to the nine months ended September 30, 2013. We continue to expect that total after-tax charges will be between $300 and $350 and that pre-tax charges will be slightly higher than $400. Cash costs are projected to be 50 to 55 percent of total charges. Noncash charges consist primarily of asset impairment charges and incremental depreciation. During the nine months ended September 30, 2014, $13 of pre-tax charges were recognized for the strategic changes, and we made cash payments of $32. During the nine months ended September 30, 2013, $67 of pre-tax charges were recognized for the strategic 21 -------------------------------------------------------------------------------- changes, including $44 recorded in cost of products sold and $20 recorded in marketing, research and general expenses and $3 in other (income) expense, net. A related benefit of $15 was recorded in provision for income taxes. For additional information on the European strategic changes, see Note 4 to the Consolidated Financial Statements. 2014 Organization Restructuring In October 2014, we initiated a restructuring plan in order to improve organization efficiency and offset the impact of stranded overhead costs resulting from the spin-off of our health care business. The restructuring is intended to improve our underlying profitability and increase our flexibility to invest in targeted growth initiatives, brand building and other capabilities critical to delivering future growth. The restructuring is expected to be completed by the end of 2016, with total costs anticipated to be $130 to $160 after tax ($190 to $230 pre-tax). Cash costs are projected to be approximately 80 percent of the total charges. Workforce reductions are expected to be in the range of 1,100 to 1,300 and primarily impact salaried employees. Cumulative pre-tax savings from the restructuring are expected to be $120 to $140 by the end of 2017. We expect that $85 to $105 of the after-tax charges ($125 to $150 pre-tax) will occur in the fourth quarter of 2014, while savings from the restructuring are not anticipated to be significant until 2015. The restructuring is expected to impact all of our business segments and our organizations in all major geographies. Liquidity and Capital Resources Cash Provided by Operations Cash provided by operations was $2.3 billion for the first nine months of 2014, compared to $2.1 billion in the prior year. The increase was primarily driven by lower payments in 2014 for income taxes and restructuring actions. Investing During the first nine months of 2014, our capital spending was $730 compared to $697 in the prior year. We anticipate that full year 2014 capital spending will be toward the low end of our target range of $1.0 to $1.2 billion. Financing We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During the first nine months of 2014, we repurchased 10.3 million shares of our common stock at a cost of $1.1 billion through a broker in the open market. In 2014, we plan to repurchase approximately $2.0 billion of shares, subject to market conditions, including the repurchases expected to be made using the distribution associated with the spin-off of our health care business. At September 30, 2014, total debt and redeemable securities was $7.0 billion compared to $6.3 billion at December 31, 2013. On May 22, 2014, we issued $300 aggregate principal amount of floating rate notes due May 19, 2016 and $300 aggregate principal amount of 1.9% notes due May 22, 2019. Proceeds from the offering were used for general corporate purposes and repurchases of common stock. In June 2014, we entered into a $2.0 billion revolving credit facility which expires in 2019. This facility, currently unused, replaced a similar facility for $1.5 billion, supports our commercial paper program, and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason. Our short-term debt, which consists of U.S. commercial paper with original maturities up to 90 days and/or other similar short-term debt issued by non-U.S. subsidiaries, was $213 as of September 30, 2014 (included in debt payable within one year on the Consolidated Balance Sheet). The average month-end balance of short-term debt for the third quarter of 2014 was $358. These short-term borrowings provide supplemental funding for supporting our operations. The level of short-term debt generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as dividends and income taxes. We account for our operations in Venezuela using highly inflationary accounting. On February 13, 2013, the Venezuelan government announced a devaluation of the Central Bank of Venezuela ("Central Bank") regulated currency exchange system rate to 6.3 bolivars per U.S. dollar and the elimination of the SITME rate. As a result of the 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 measure K-C Venezuela's bolivar-denominated transactions into U.S. dollars. The $36 pre-tax charge is reflected in the Consolidated 22 -------------------------------------------------------------------------------- Income Statement in other (income) and expense, net for the nine months ended September 30, 2013. In the Consolidated Cash Flow Statement, this non-cash charge is included in other in cash provided by operations. During March 2013, the Venezuelan government announced a complementary currency exchange system, SICAD. Participation in SICAD is controlled by the Venezuelan government. SICAD is intended to function as an auction system, allowing entities in specific sectors to bid for U.S. dollars to be used for specified import transactions. In February 2014, the president of Venezuela announced that another exchange system (referred to as SICAD 2) would be initiated. Initial exchanges under SICAD 2 began on March 24, 2014. We measure results in Venezuela at the rate in which we transact our business. Since March 2013, exchange transactions have taken place through letters of credit which resulted in an effective exchange rate of 6.3 bolivars per U.S. dollar and through approved transactions using the regulated currency exchange system, which were also at a 6.3 exchange rate. To date, we have not gained access to U.S. dollars in Venezuela through either SICAD or SICAD 2 auctions. Whether we will be able to access either SICAD system in the foreseeable future and what volume of currency exchange will transact through these alternative mechanisms is unclear. Accordingly, we continued to measure K-C Venezuela operations at the rate of 6.3 bolivars per U.S. dollar through September 30, 2014. Through September 30, 2014 we continued to manufacture products in Venezuela as well as import finished goods under approved letters of credit. However, recent government approvals to import raw materials under letters of credit are not at a level sufficient to sustain all of our manufacturing capabilities in country. Unless we are able to obtain further approvals to import raw materials through approved letters of credit or through the official government exchange system, we may be forced to curtail some or all of our local manufacturing until such approvals to import additional raw materials are forthcoming. We continue to seek approval for additional imports, as well as monitor the financial policies and practices of the Venezuelan government to assess the impact on our US GAAP accounting and reporting for our operations in that country. At September 30, 2014, K-C Venezuela had a bolivar-denominated net monetary asset position (primarily cash) of $435, and our net investment in K-C Venezuela was $572, both valued at 6.3 bolivars per U.S. dollar. Net sales of K-C Venezuela represented less than 3 percent of consolidated net sales in 2014 and approximately 2 percent in 2013. Management believes that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, capital spending, payment of dividends, pension plan contributions and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future. Legal Matters We are subject to various legal proceedings, claims and governmental inquiries, inspections, audits or investigations pertaining to issues such as contract disputes, product liability, tax matters, patents and trademarks, advertising, pricing, business practices, governmental regulations, employment and other matters. Although the results of litigation and claims cannot be predicted with certainty, we believe that the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity. We are subject to federal, state and local environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. We have been named a potentially responsible party under the provisions of the U.S. federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statutes, at a number of sites where hazardous substances are present. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition, results of operations or liquidity. 23-------------------------------------------------------------------------------- Business Outlook In 2014, 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 and shareholder-friendly capital allocation. Growth in organic volume, net selling prices and product mix is expected to be in the combined 3 to 5 percent target range, led by K-C International. We expect net sales to be negatively impacted by unfavorable foreign currency exchange rates of 2 to 3 percent and lower sales from the European strategic changes and pulp and tissue restructuring actions of 1 percent. We plan to achieve cost savings of at least $300, expect unfavorable foreign currency exchange rate effects and anticipate commodity cost inflation toward the high end of the previously communicated range of $150 to $250. We anticipate that advertising and research and development spending will increase faster than net sales to support targeted growth initiatives and innovation activities. We expect net income from equity companies to be down year-on-year. Our fourth quarter results will be impacted by the spin-off of the health care business and the 2014 organization restructuring (see additional information elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations and the footnotes to the Consolidated Financial Statements). In 2014, we anticipate capital spending will be toward the low end of our target range of $1.0 to $1.2 billion range and share repurchases to total $2.0 billion, subject to market conditions, including the repurchases expected to be made from the distribution associated with the spin-off of our health care business, and expect to contribute approximately $200 to our defined benefit pension plans. Information Concerning Forward-Looking Statements Certain matters contained in this report concerning the business outlook, including the anticipated costs, scope, timing and financial and other effects of the European strategic changes and 2014 organization restructuring, the spin-off of our health care business and related matters, cash flow and uses of cash, growth initiatives, innovations, marketing and other spending, cost savings and reductions, net sales, anticipated currency rates and exchange risks, raw material, energy and other input costs, contingencies and anticipated transactions of Kimberly-Clark, including dividends, share repurchases and pension contributions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are based upon management's expectations and beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them. The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control, including fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, potential competitive pressures on selling prices for our products, energy costs and retail trade customer actions, as well as general economic and political conditions globally and in the markets in which we do business, could affect the realization of these estimates. For a description of certain factors that could cause our future results to differ from those expressed in these forward-looking statements, see Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 entitled "Risk Factors." Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results. |